I'm using SimpleXML to process data sent back from an API request, and I ran into the CDATA problem and the error you get from html entities, and here is a solution i came up with, don't know if it's the most practical, but it's working.
<?php
$str = <<< XML
<?xml version="1.0" encoding="UTF-8" standalone="yes"?>
<menu>
<item>
<title><![CDATA[Café]]></title>
<description><![CDATA[Some description.]]></description>
</item>
</menu>
XML;
$str = preg_replace("/\<\!\[CDATA\[(.*?)\]\]\>/ies", "'[CDATA]'.base64_encode('$1').'[/CDATA]'", $str);
$xml = new SimpleXMLElement($str);
foreach ($xml->item as $item) {
$tmp = (string) $item->title;
$tmp = preg_replace("/\[CDATA\](.*?)\[\/CDATA\]/ies", "base64_decode('$1')", $tmp);
echo $tmp;
}
?>