ISO-8859-1 seems not recognized for UTF-8 encoding

The green table has characters from Basic Latin page of the Unicode character set. The red and blue tables have characters from the Latin-1 Extension page of Unicode. The characters in the red one were entered directly by typing them (just the way Basic Latin ones were typed). The same characters were entered in the blue one in the form of HTML entities made up using their codepoint values.

Right now, this page is declared as UTF-8. As you see, the red table is not showing the typed letters and signs but the character not found glyph. If you try to validate this page at http://validator.w3.org, it will issue the following error:
Sorry! This document cannot be checked. -- utf8 "\xB0" does not map to Unicode
If you change the character set declaration to 'iso-8859-1', it issues the following warning:
Line 5, Column 27: Using windows-1252 instead of the declared encoding iso-8859-1.