Liquid XML Studio works as follows.
When we load a document in we use the Byte Order Marker (BOM) to determine the encoding, using this to decode the document into an internal Unicode format, the encoding attribute from the XML (if present), is used to refine the decoding of the data to its Unicode form.
If the BOM and encoding attribute conflict then a best guess is made (typically relying on the BOM).
We store and manipulate the XML document internally as Unicode, and keep the encoding provided by the encoding attribute (or BOM) as a property of the document.
Whenever you paste data into the document, it is dealt with as Unicode.
When you save the document the document is written out using the encoding property associated with the document (this may be changed by the user in the properties window).
So you should have no issues with encoding.
The BOM is a different matter. Unicode files must have a BOM to identify them. The only time the BOM becomes an issue is UTF8. For Utf8 there is no standard that says whether the BOM should be written or not. Most MS apps and newer apps write it, some older apps don’t (and worse still don’t understand it when its read in). In order to accommodate this we write the BOM by default, but there is a global option to turn it off for UTF8.
