I am wondering if it is possible to have JAXB not to create Java object for XML elements that serve as wrappers. For example, for XML of the following structure
The whole point of JAXB or other mapping systems is to map the elements and their hierarchy to classes. In your example, you seem to want JAXB to somehow know that it can marshal entity into wrapper/entity and vice-versa without actually creating the class used for the wrapper mapping and the connection between root and entity. Which, as presented, is roughly equivalent to asking how to connect a car engine to the wheels without a driveshaft.
So, unless I am missing the point, the answer is no - neither JAXB or any other mapping program can do this. You can avoid creating classes by using something that does mapping purely dynamically (see Groovy, GPath for an example), but that avoids creating all classes, not just skipping one intermediate level in a hierarchy.