Not sure what you mean by "using entities". Entity references are expanded by the XML parser and XSLT only gets to see the document after entity expansion.
The stylesheet as written displays the relative paths. It's essentially a 1.0 stylesheet, but if you're using a 2.0 processor you can get the absolute URIs by using the document-uri() function.
Michael Kay
http://www.saxonica.com/
Author, XSLT Programmer's Reference and XPath 2.0 Programmer's Reference