XSLT disable-output-escaping

[Lisa]

I need to apply the HTML formatting tags and the French accented
characters in a XML document. The XML is generated from a database
that has HTML tags and French accented characters in the records.

I have specified <xsl:output method="html"/> and
encoding="iso-8859-1".

When I apply the xsl:value-of and set the disable-output-escaping to
"yes", the HTML formatting tags are displayed correctly, but the
French accented characters are displayed as "?". If I set the
disable-output-escaping to "yes", the French accented characters are
displayed properly, but not the HTML formatting tags. The HTML
formatting tags are output as &lt;...&gt; and display <..> in the
browser (e.g. <p>)

Any suggestion that how I can display both HTML formatting tag and
French accented characters properly …
Thanks in advance,
Lisa