FULL PRODUCT VERSION :
#java -version
java version "1.6.0_10-rc"
Java(TM) SE Runtime Environment (build 1.6.0_10-rc-b28)
Java HotSpot(TM) Server VM (build 11.0-b15, mixed mode)


ADDITIONAL OS VERSION INFORMATION :
Linux danbev-laptop 2.6.24-19-generic #1 SMP Wed Aug 20 22:56:21 UTC 2008 i686 GNU/Linux

A DESCRIPTION OF THE PROBLEM :
When using Java1.5 the following string, "<element> &amp; some more text</element>"  would generate the following callback order:
startDocument
startElement 'element'
characters ' ';
startEntity 'amp'
characters '&'
endEntity 'amp'
characters ' some more text'
endElement 'element'
endDocument

But when the same application is run with Java1.6 order is the following:
startDocument
startElement 'element'
characters ' ';
startEntity 'amp'
endEntity 'amp'
characters '&'
characters ' some more text'
endElement 'element'
endDocument

Notice how the startEntity and endEntity are not interleaved with the characters callback.

STEPS TO FOLLOW TO REPRODUCE THE PROBLEM :
Please run the test class pasted in the "Source code for an executable test case:" field.

EXPECTED VERSUS ACTUAL BEHAVIOR :
EXPECTED -
Expected callback order:
startDocument
startElement 'element'
characters ' ';
startEntity 'amp'
characters '&'
endEntity 'amp'
characters ' some more text'
endElement 'element'
endDocument
ACTUAL -
Actual callback order:
startDocument
startElement 'element'
characters ' ';
startEntity 'amp'
endEntity 'amp'
characters '&'
characters ' some more text'
endElement 'element'
endDocument

REPRODUCIBILITY :
This bug can be reproduced always.

---------- BEGIN SOURCE ----------
import static org.junit.Assert.assertEquals;
import java.io.IOException;
import java.io.StringReader;
import java.util.ArrayList;
import java.util.List;
import org.junit.Test;
import org.xml.sax.Attributes;
import org.xml.sax.InputSource;
import org.xml.sax.SAXException;
import org.xml.sax.XMLReader;
import org.xml.sax.ext.DefaultHandler2;
import org.xml.sax.helpers.XMLReaderFactory;

/**
 * Simple test to demonstrate differences between Java versions with regard to SAX
 * callback ordering.
 * <p/>
 *
 * @author <a href="mailto:###@###.###">Daniel Bevenius</a>
 *
 */
public class XmlParserTest
{
	@Test
	public void entityCallbackOrderJava() throws SAXException, IOException
	{
        final String input = "<element> &amp; some more text</element>";
        
		final MockContentHandler handler = new MockContentHandler();
		final XMLReader xmlReader = XMLReaderFactory.createXMLReader();
		
		xmlReader.setContentHandler(handler);
                xmlReader.setProperty("http://xml.org/sax/properties/lexical-handler", handler);
		
		xmlReader.parse(new InputSource(new StringReader(input)));
		
		final List<String> events = handler.getEvents();
		//assertJava5CallbackOrder(events);
		assertJava6CallbackOrder(events);
	}
	
	private void assertJava6CallbackOrder(final List<String> events)
	{
		assertEquals("startDocument", events.get(0));
		assertEquals("startElement 'element'", events.get(1));
		assertEquals("characters ' '", events.get(2));
		assertEquals("startEntity 'amp'", events.get(3));
		assertEquals("endEntity 'amp'", events.get(4));
		assertEquals("characters '&'", events.get(5));
		assertEquals("characters ' some more text'", events.get(6));
		assertEquals("endElement 'element'", events.get(7));
		assertEquals("endDocument", events.get(8));
	}
	
	private void assertJava5CallbackOrder(final List<String> events)
	{
		assertEquals("startDocument", events.get(0));
		assertEquals("startElement 'element'", events.get(1));
		assertEquals("characters ' '", events.get(2));
		assertEquals("startEntity 'amp'", events.get(3));
		assertEquals("characters '&'", events.get(4));
		assertEquals("endEntity 'amp'", events.get(5));
		assertEquals("characters ' some more text'", events.get(6));
		assertEquals("endElement 'element'", events.get(7));
		assertEquals("endDocument", events.get(8));
	}
	
	private class MockContentHandler extends DefaultHandler2
	{
		private List<String> events;
		
		public List<String> getEvents()
		{
			return events;
		}

		@Override
		public void startDocument() throws SAXException
		{
			events = new ArrayList<String>();
			events.add("startDocument");
		}
		
		@Override
		public void characters( char[] ch, int start, int length ) throws SAXException
		{
			events.add("characters '" + new String(ch, start, length) + "'");
		}
		
		@Override
		public void startElement( String uri, String localName, String name, Attributes atts ) throws SAXException
		{
			events.add("startElement '" + name + "'");
		}
		
		@Override
		public void endElement( String uri, String localName, String name ) throws SAXException
		{
			events.add("endElement '" + name +"'");
		}

		@Override
		public void endDocument() throws SAXException
		{
			events.add("endDocument");
		}
		
		@Override
		public void startEntity( String name ) throws SAXException
		{
			events.add("startEntity '" + name + "'");
		}
		
		@Override
		public void endEntity( String name ) throws SAXException
		{
			events.add("endEntity '" + name + "'");
		}
	}
}

---------- END SOURCE ----------

Release Regression From : 5.0
The above release value was the last known release where this 
bug was not reproducible. Since then there has been a regression.