The UTF8 flag indicates which internal storage format is used for the string. It's usually on when the data has been decoded (from UTF-8, iso-8859-1 or whatever), which means it's usually on when the string contains text. Since you're examining the parsed/decoded XML, it's not surprising it's on. After all, the purpose of XML is to store text, and the purpose of parsing an XML document is to extract the text data within it.

I am trying to use iso-8859-1 and not use UTF8.

You're using neither iso-8859-1 nor UTF-8; you are using unicode characters. You're free to encode those characters using any encoding you wish (e.g. UTF-8, iso-8859-1, etc) when it's appropriate (e.g. on output).