DOCBOOK: XML to XML transform with entities

I am doing an XML to XML transformation.

If I put the following into my XSL file, entities such as — create 
gibberish characters in the new XML file:

                 <xsl:output method="html" />

If I put the following into my XSL file, the entities work fine but the first 
line of the new XML file is "Service started.":

                 <xsl:output method="html" />

I want to copy the entities "as is" from the original XML file into the new 
XML file - but I don't want the extra line at the top of the new XML file.  

I seem to be able to do one or the other.  %-)

Any ideas?

Thanks very much, Freda