<p>When I add &amp;nbsp; or &amp;eacute; to a text value of a listitem, it display the code of the HTML entity instead of the result (a space or é).</p>

<p>I can add "physical" non-breaking spaces or special chars, but I would like to avoid that if possible. Sometimes the data stored in database is encoded, and I don't want to always process data before displaying it.</p>

<p>Any solution ?</p>

<p>Thanks</p>

<p>Edit note : previous description noted it was about a dropdownlist simulating a treeview, but it was merely an example ; I can't and don't want to replace the dropdownlist by anything else.</p>

Standard drop down lists are very poor at representing treeviews .
They can handle going one level deep if the top level is not selectable (see the
optgroup
element[1]), but beyond that I suggest taking a regular list (ordered or unordered) with as much nesting as you need (remember sublists go inside list items in their parent list) and including a checkbox or radio button with each selectable list item.
Some JavaScript could then be added to manipulate classes to create a drop down effect if desired.
[1] Optgroup should be able to go deeper but, IIRC, browser support is sucky.