Here you have the upstream's answer:

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It's not clear to me that entities should be parsed here. The decription of
-v is

-v or --value-of <xpath> - print value of XPATH expression

The argument is an XPath expression, not an XML string representing an
XPath expression.
It seems to me that the older behaviour was an accident of the
implementation rather than an official feature. A problem with the old
behaviour would be:
$ ./src/xml sel -T -t -v "'&'"
Entity: line 23: parser error : xmlParseEntityRef: no name
<xsl:value-of select="'&'"/>

See: 
http://sourceforge.net/tracker/?func=detail&aid=3240736&group_id=66612&atid=515106
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But there is an open thread in devel upstream list where this issue can be 
discussed. 
Do you have an argument that could be made in favour interpreting entities on 
practical grounds?
I can forward your argument/s to this list, if you want.

Thanks for your collaboration!
Mònica

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