You can disable output encoding in Kid for some HTML tags:
from kid import serialization
serialization.HTMLSerializer.noescape_elements.add('div')
Then in your template you dont need to use XML() anymore:
<div py:content="yourvariable"/>
If you want to insert your entity in a tag in the template source, you must enclose it with CDATA:
<div><![CDATA[ ]]></div>