xml and entities?

OK, this is not specific to RNG, but I'm curious what people think 
about this issue.  According to this:

http://dhillman.com/theplace/xml/xml_syntax.htm

... one should not use apostrophe or double quote characters in XML 
documents.

"Depending on the parser, the apostrophe and double quote will 
generally be
presented without problems, but technically, should be defined by 
character
entities."

Is that right???  Clearly this would be the case within attributes, but 
even in elements?

Am having a polite argument about this with someone who wants the code 
his tool outputs to be strictly compliant...

Bruce