XSD Notation and Entities

Hello!

I'm very much new in XML/XSD and is currently struggling with notations and entities. I have an XML document which was based on a DTD which have some entity declarations to an external TIFF file:

<?xml version="1.0" encoding="utf-8"?>
<!DOCTYPE article PUBLIC "-//DATA Article v100//EN" "sample.dtd  "[
<!NOTATION TIFF SYSTEM "TIFF">
<!ENTITY fig1 SYSTEM "f01.tif" NDATA TIFF>
<!ENTITY fig2 SYSTEM "f02.tif" NDATA TIFF>
<!ENTITY fig3 SYSTEM "f03.tif" NDATA TIFF>]>
<article id="X001">
 
and in the body of my XML, I have an element <figgrp> which will link to the entities:
 
<figgrp id="fig1" column="2"><no>FIG 1.</no><caption>This is figure 1.</caption></figgrp> 
 
I also have an element <figref> which I used as a reference to the <figgrp> element: 
 
<p>As shown in <figref rid="fig1">Figure 1</figref>, where . . . </p>
 
I need to  convert it into an XML document  that would parse in an XSD that I created. 

<?xml version="1.0" encoding="utf-8"?>
<article id="X001"  xmlns:xsi="  <http://www.w3.org/2001/XMLSchema-instance> http://www.w3.org/2001/XMLSchema-instance"
xsi:noNamespaceSchemaLocation="sample.xsd">

What should I do with notation and entities? How are they coded in such a way that an XSD parser will still check the ID especially in the <figref> element?  
 
One option I'm thinking currently is to use both the DTD and Schema Instance, DTD for the entities and Schema for the structure but I'm still hoping I can do away with the DTD.

Any help would be greatly appreciated. Thanks in advance!

- Henry