I guess this is the proper solution then:

<xsl:character-map name="x">
    <xsl:output-character character="&#160;" string="&amp;#160;"/>
</xsl:character-map>
    <xsl:output indent="yes" use-character-maps="x"/>

    <xsl:template match="@*|node()">
        <xsl:copy>
            <xsl:apply-templates select="@*|node()"/>
        </xsl:copy>
    </xsl:template>
</xsl:stylesheet>


Cheers,
Jesper Tverskov

http://www.xmlkurser.dk
http://www.xmlplease.com