The major browsers have no issues with this, though note that some tools like Inkscape won't parse the DTD nor expand the entities.
[0] https://kingbird.myphotos.cc/packing/squares_in_squares.html
I wonder why SVG's original designers found it necessary to supply an ad-hoc re-implementation of the entity mechanism. I think it might have to do with how rendering properties can be overridden at the usage site? At least I don't think it was established that browsers ignore entity definitions or basically anything in the document prolog/DOCTYPE considering SVG was part of W3C's push to replace HTML's SGMLish legacy syntax with XHTML/XML.
To be clear, it's using both of them for different purposes, you'll find both <use> elements and <!ENTITY> declarations in files like https://kingbird.myphotos.cc/packing/square-11.svg. You can't <use> a numeric quantity in an attribute, the closest alternative for those would be CSS variables.
As for the existence of <use>, I agree with jarek-foksa, the idea is that the original element and all its clones from <use> are linked in the DOM at runtime, as opposed to DTD entities which are baked in textually. Also, most people hate XML, I'd imagine they'd hate internal DTDs doubly so, especially with how little information can be found about them outside the XML standard.
(Browser devs also love to beat the drum of minimizing attack surface, so it's a bit surprising that DTDs and XML stylesheets still work at all. I'd expect them to tear out that functionality in a heartbeat if it were ever used in a modern exploit.)
