I'm also a supporter for UTF-8, but as a webdeveloper I also has to take IE6 lousy support into this and go the latin 1 way. I also maintain some websites which is already coded in latin 1.

But I think it's bad behaviour that it doesn't warn you that it's changing the encoding. It messes up the whole document unless you undo it. If you try to revert to latin 1 (by reopen by encoding) after it has swapped it, the old text is still messed up.

It would be nice to have an option to paste text at the current encoding and truncate characters not availible. That is a better option than destroying a document (when you are forced to keep it in latin 1). It costs so much time to change all the garbaged text by hand afterwards.