When you have an HTML entity in a chat message, the normal Chat Window will interpret it normally (if "normally" may mean: it is parsed as an entity). I.e.,
becomes a non-breaking space character.
However, when you click the permalink, the entity is shown as-is, i.e., in the source you can see that the
& is escaped as
I don't know which is better (escaped or not), but in all other screens of StackOverflow, Meta, Comments etc, most entities are allowed and interpreted. So I'd assume that it should be interpreted in the permalink as well. Here's an example (see the
in the middle of the post)
Edit: the same is true for "latest chats" under "other rooms you're in" or starred messages: