I think the possibility to store catalog files in another encoding than utf-8 is there because of text editor support - most editors don't let the user save a file in utf-8 yet.
Why there would be two different encodings for the same locale in CVS I don't know - maybe an oversight. Peter?
If you are using aolserver3.3ad13 then you can control the output charset of aolserver by setting these parameters in your config file:
ns_param HackContentType 1
ns_param URLCharset iso-8859-1
ns_param OutputCharset iso-8859-1
ns_param HttpOpenCharset iso8859-1
ns_param DefaultCharset iso-8859-1
But this limits you to one charset for the whole site, hmm. I wonder what the recommended mechanism is to output in a user specific charset. Again -Peter? ;)