As far as I can see (googling) UCS-2 is a subset of UTF-16.

The following note is in the XML::Parser docs:

Expat has built-in encodings for: C<UTF-8>, C<ISO-8859-1>, C<UTF-16>, and C<US-ASCII>. Encodings are set either through the XML declaration encoding attribute or through the ProtocolEncoding option to XML::Parser or XML::Parser::Expat.

Try modifying the charset entry in the XML file from ISO-10646-UCS-2 to UTF-16 and see if that helps. You can also file a request/bug-report with your findings at the relevant request tracker entry.