The MicroXML spec <https://dvcs.w3.org/hg/microxml/raw-file/tip/spec/microxml.html#xml> was originally meant to include all the standard entities.  Unfortunately, we ran up against this trilemma:  "All the entities, no DTDs, XML compatibility: pick two."  We wound up picking the second and third.  

Similarly, there has always been a lot of resistance to namespaces, so we dropped those.  PIs and the XML declaration produce the annoying property that the top of an XML tree is not an element, so that an XML document can't be embedded in another document, so they went.  We added a data model expressible in JSON, and it's all done in 8 pages.

I realize that only some of these were your goals.  But I don't think it's fair to describe this as a slightly smaller square peg in a round hole.  The peg is still round.