You don't have an XML document, you have an XML external parsed general entity.
And you don't need XSLT to make an XML document out of it.
If the file you have is named "file.ent", then all you need is (modulo any typos I make below) an XML document "file.xml" along the lines of:
<!DOCTYPE doc
[
<!ENTITY file SYSTEM "file.ent">
]>
<doc>&file;</doc>
Now when you process "file.xml", the XML processor will pull in your "file.ent" underneath the given document element (defined as the top-most element of an XML document). It doesn't have to be named "doc".
If you want to make a single XML file from the above two files, then use XSLT and the identity transform.