bla.rb

require 'nokogiri'
require 'htmlentities'

# ...

class EntityReplacingVisitor
  def visit(node)
    if node.instance_of?(Nokogiri::XML::EntityReference)
      @decoder ||= HTMLEntities.new
      node.replace(@decoder.decode(node.to_xml))
      return
    end
    node.children.each do |child|
      child.accept(self)
    end
  end
end

xml_doc = Nokogiri::XML(xml) do |configure|
  configure.strict # strict parsing
end
xml_doc.accept(EntityReplacingVisitor.new)