Standalone and non-validating parsers-- clarification?

I was wondering if I could get some clarification on this paragraph:

http://www.w3.org/TR/REC-xml/#wf-entdeclared

"Note that non-validating processors are not obligated to to read and 
process entity declarations occurring in parameter entities or in the 
external subset; *for such documents*, the rule that an entity must be 
declared is a well-formedness constraint only if standalone='yes'." 
(emphasis added).

My question is as follows-- if you have a non-validating processor which 
is processing entity declarations occurring in PEs or the ExtSubset is 
it  also a violation of the WFC if it encounters an undeclared entity 
ref even when standalone="no"?

I can't find a good way to make clear what I am asking-- I think my 
expectation was that instead of "for such documents" it would read "for 
such processors". There is an important distinction there and I think I 
have just read it wrong so many times I can't get it straight.

Thanks again for any help... these is the last WFC area I have... of 
course then I have to move on to VCs... : )

Thanks,
Jeff Rafter