DOCBOOK-APPS: PSGML mode

Hi,

I am trying to write a dual language document.
One part in english and the other part in german.

I am using Emacs with PSGML mode. Release 1.2.3
I have a standard SuSE installation and have not made any changes
to the default (SuSE) settings of emacs on this computer.

I would like to set up so that I can use entities on the fly when pressing
a strange german character like for example ö (ö), so I don't have to
write six characters to get one character.

In the PSGML menu there is a "Make Character Reference" command,
but firstly you have to place the cursor on the character to be converted,
and secondly it generates ࣶ which is even more hard to read than
ö

Idealy I'd like the original character to be displayed by emacs but
the entity written to file.

I guess this is possible with .emacs customizations.

Have anyone come up with a solution to this problem ?

/Fred