Encoding is simply one of the most strangest topics with websites.
Usuaually I find issues when translating between encoding types such as UTF-8 to ISO or any variation of this. Setting the encoding type of the page is extremely important. "Obviously." Otherwise your browser trys to guess what it is and may fail at it. Along with this hackers can easily change the encoding type and get around your XSS filters. Which will then allow them to do XSS attacks.
In short I found this article to be extremely helpful. I am keeping this short as the article is extremely long and describes all this and more..
