The W3C specs don't give you this level of control over serialization. I'm not sure why you want it - the two forms are exactly equivalent. I thought that Saxon would use a named entity rather than a numeric entity here, but it seems not. If you really care, you can force use of a named entity in Saxon by
<xsl:output method="html" encoding="UTF-8" saxon:character-representation="entity" xmlns:saxon="http://saxon.sf.net/"/>
Michael Kay
http://www.saxonica.com/
Author, XSLT Programmer's Reference and XPath 2.0 Programmer's Reference