Display of ISO8859-1 characters broken in Terminal app?

Question

I've had this issue for years, but never got around to pursuing an answer until now.
I cannot get the Mac Terminal application to display ISO8859-1 characters with
diacritical markings, regardless of the locale and display settings.  It works fine
in xterm.
In Terminal, I get the following output (from an anagram generator I wrote):
  $ a9 -cux 1 orale | head -1
  ??rale!
In xterm, I get what I would expect to get:
  $ a9 -cux 1 orale | head -1
  ¡Órale!
Running the output through od produces the same output in both:
  $ a9 -cux 1 orale | head -1 | od -b
  0000000   302 241 303 223 162 141 154 145 012
The locale is the same in both:
  $ locale
  LANG="en_US.ISO8859-1"
  LC_COLLATE="en_US.ISO8859-1"
  LC_CTYPE="en_US.ISO8859-1"
  LC_MESSAGES="en_US.ISO8859-1"
  LC_MONETARY="en_US.ISO8859-1"
  LC_NUMERIC="en_US.ISO8859-1"
  LC_TIME="en_US.ISO8859-1"
  LC_ALL=
The default set of terminal encodings are enabled, including Western (ISO Latin 1).
Numerous other combinations of locales with C, UTF-8 make no useful difference.
FWIW, I haven't had any problem with this on Linux over the last 15 years, so it's
been easy to ignore the problem on the Mac.  But I'd like to figure it out now.

Answer 1

Hi,
My default Terminal settings in Preferences > Settings > Advanced > Character Encoding is set to 'Unicode (UTF-8)'.
Do you have that option?
John M