So where am I going wrong ??

Not showing us the code plus some XML sample input that could potentially allow us to reproduce the problem... :)

There's nothing wrong with <?xml version="1.0" encoding="ISO-8859-1"?> as is, so there must be something else (the context in which it occurs, ...?), or you've found a bug.

P.S.:

...when run in perl-5.8.9

The path /home/tools/perl-5.12.1/... from the error message suggests you're using 5.12.1, not 5.8.9.