There is no conflict (unless MIME agents can alter character sets
arbitrarily). Dan had an excellent article explaining this some time
ago. If I cannot get my paper cleaned up by Wednesday or so, I'll post
an outline of my ideas anyway. They solve the declaration and numeric
entity problems, and they require very few, if any changes to current
browsers.
The real problem is whether we are documenting current practise or
not. If we are, the current spec is correct, If we are writing
soemthing people must conform to, it is incorrect. I thought 2.1 was
the latter and 2.0 was the former.