This does not seem to be that bad :) I wonder what were the good points on using reference instead of chapter here... Chapter seems to be able to contain a <refentry> just fine:
http://docbook.org/tdg/en/html/chapter.html
Would be nice to validate your resulting XML against the used docbook version's DTD.
I have played with this before and as far as i remember the problem is
that only a certain order of <section> and <refentry> tags is allowed
within <chapter> by the DocBook DTD
AFAIR DSSSL is not too picky when it comes to DTD issues like this
while XSLT and "make test" will complain heavily
Anyway, i have considered this approach as a failed experiment in the
past ...
So, do we modifiy the DTD and leave docbook ?