[xsl] Identity Transform losing special characters

[Karl Stubsjoen <kstubs@xxxxxxxxx>]

I have things like this in my XML:

          <fo:inline>
            <fo:inline>Some Company</fo:inline>
          </fo:inline>&#160;
          <fo:block/>

My identity transform is losing the &#160;.
I've tried both:

<xsl:apply-templates select="@* | *"/>
<xsl:apply-templates select="@* | node()"/>

With a match and copy like this (again having tried both node() and *):
<xsl:template match="@* | node()">
    <xsl:copy>
        <xsl:apply-templates select="@* | node()"/>
    </xsl:copy>
</xsl:template>

Where am I going wrong?

Karl..