Request for clarification: xsl:output - interaction of omit-xml-declaration and encoding

A user complains that with

<xsl:output omit-xml-declaration="yes" encoding="iso-8859-1"/>

Saxon ignores the omit-xml-declaration attribute.

Other processors apparently produce output that violates the rule in XML
section 4.3.3, namely:

"parsed entities which are stored in an encoding other than UTF-8 or UTF-16
must begin with a text declaration containing an encoding declaration".

The spec doesn't make it clear what the intended behavior is here: could we
have a ruling please?

(I think the user in this case wants to produce ill-formed XML fragments
that can be concatenated together to produce a well-formed XML document).

The interaction of omit-xml-declaration with standalone, doctype-system, and
doctype-public is also unclear.

Mike Kay