DTD entities come from SGML, and are still commonly used as an extensibility/modularity mechanism in XML. XML power users (e.g. for documentation) commonly have

DTD entities come from SGML, and are still commonly used as an extensibility/modularity mechanism in XML. XML power users (e.g. for documentation) commonly have DTDs that refer to entities that can be replaced to customize the format. IBM's DITA is an example for this. Having only one level of DTD expansion would make that much less powerful. I think that's a legitimate use case, but the resulting system is still a mess IMHO. Like many macro systems it's very hard to understand and debug, and on top of it you have to understand a relatively obscure format that isn't even XML (DTDs). That being said, like many of the things in XML, DTDs and entities not very useful outside of publishing/markup use cases, and dangerous on top of it (not only for the billion laughs, e.g. including system entities).