... I
wondered if it's considered a better way to go than outputting the Unicode
£ (had to go and dig up this one at the unicode web site). My
preference is to use the Unicode character directly, but I'm wondering if
that leads to its own problems.

Use &#A3;. It must not cause problems in conforming XML tools.
Customize your favorite editor to use a shortcut key (preferrably
the keycap with the pound sign) or a tool bar to enter the
cumbersome number for you.
You could also use ISO-8859-1 and just enter the pound sign
directly.