question on latest spec

I've been a way on other activities for a while, and have just recently
gotten back to
the XML C14N specification.  I came across the following in section 2.1:
"All whitespace within the root document element MUST be preserved
(except for any #xD characters deleted by line delimiter normalization).
This includes all whitespace in external entities. Whitespace outside of
the root document element MUST be discarded."
I'm assuming that this means white space that is presented after the
document is processed
by the XML processor.  When a validating XML processor reads in a
document against a DTD,
insignificant white space is removed.  This is not the white space that
the specification is
referring to, is it?
Sincerely,
Kevin Regan