This does work:
from BeautifulSoup import BeautifulStoneSoup
s = "U.S. Adviser’s Blunt Memo on Iraq: Time ‘to Go Home’"
decoded = BeautifulStoneSoup(s, convertEntities=BeautifulStoneSoup.HTML_ENTITIES)
If you want a string instead of a Unicode object, you'll need to decode it to an encoding that supports the characters being used; ISO-8859-1 doesn't:
result = decoded.encode("UTF-8")
It's unfortunate that you need an external module for something like this; simple HTML/XML entity decoding should be in the standard library, and not require me to use a library with meaningless class names like "BeautifulStoneSoup". (Class and function names should not be "creative", they should be meaningful.)