Within title elements you should not use html mark-up of any kind. It can often be displayed literally, and that's ugly! Same thing for meta tags.

I hate it when a company brand includes the ampersand, and in some cases I've convinced them to let me use a plus sign. But I've also bit the bullet in a few cases and put the unescaped ampersand character right in the title element - and it gets indexed perfectly by the big three search engines. In my world, effective communication trumps technical validation any day.

However, in the in page content, I find no indexing problems with using html entities - so that's what I usually do.

Regardless how important keyword meta tag is important today, how do you treat ampersand in that case?

If your keyword is B&B, what would you put into keywords meta tag?

Think search. People type in "black and decker" when searching even when "Black & Decker" is the brand name. in some of the less advanced search engines replacing the "&" with "and" may help. With Google and Yahoo! however it's a fluff word and will be ignored.

Whichever you decide - stay uniform.

I'd recommend NOT encoding them in titles and text (very ugly) but DO encode them in "href=" portion of links.

There is no need to guess on things like this.

A commonly used kw tool show that searches for "b and b" versus "b & b" are virtually identical in volume.

Clearly one wants to catch all the variations for a given query when "and, &, +" are involved.

One can also try out the variations in the SE's and quickly see that that DO treat the variations differently. Sometimes, quite differently.

Re the OP's main question, seems that there is widespread agrement on avoiding encoded characters in titles. There may be agreement on using them in text too, but careful testing shows that one needs to be thoughtful about how and when.

So, in keywords, you type "b&b" and "b b" as variations? Are these two treated as a same keyword?
How about description?

Go type every variatioin of b & b into G. See what you learn.
BB
B&B
B & B
BandB
B and B
B+B
B + B

Then do same at Y, Live, Ask.

Then think about your page titles and on-page text.

And, go find other special characters and see how they are treated.

Try it with simple, commom punctuation marks too. And, don't forget to throw in a few nonsense terms to see what happens when the engines don't have a frame of reference. ;-)