as HTML source output from XSLT - non breaking

Adam Knight proposed this question 2 months ago, (thread titled Using
  in XSL HTML Output)

Please excuse me, I did not understand the answers, and, if any are used
in code, they do not achieve the desired affect.

The desired effect - a Table of Contents or list of Anchors, space
delimited.

Eg HTML source to look like
<a href="#sect1">Section1</a>&nbsp;<a href="#sect2">Section2</a>

The XSLT I use for that is

<xsl:output method="html" encoding="iso-8859-1" indent="yes"/>
..
<xsl:for-each select="section">
<a href="#{@Anchor}"><xsl:value-of select="@SectionName"/></a>{I wish to
output to HTML &nbsp;}
</xsl:for-each>

Replace {I wish to output to HTML &nbsp;} with..

&nbsp;
XSL Error: Reference to undefined entity 'nbsp'.

&amp;nbsp;
<a href="#sect1">Section1</a>&amp;nbsp;<a href="#sect2">Section2</a>
This outputs in text as &nbsp; not as the space desired

<![CDATA[&nbsp;]]>
<a href="#sect1">Section1</a>&amp;nbsp;<a href="#sect2">Section2</a>
This outputs in text as &nbsp; not as the space desired

&#32;
<a href="#sect1">Section1</a> <a href="#sect2">Section2</a>
No &amp; but it is a space - but not a &nbsp; (I cant have 2 spaces -
well, I can, but the HTML browser will display only 1)

&#38;nbsp
<a href="#sect1">Section1</a>&amp;nbsp;<a href="#sect2">Section2</a>
DAMN - how did it know to to map &#38 to &amp;


At the moment I have the space with a span so it may be styled up (with
CSS) for the extra width.
I have read the FAQ - and it is good - thanks all - and with that
section on special characters I can output tabs and special characters -
I just cannot output &nbsp; to the HTML client.

Can it be done?