If the html extension writes the epub file and adds the meta charset="iso-8859-1" that means the text is encoded that way. It must be read in as iso-8859-1 and recoded to utf-8 properly. Sigil can actually detect that and properly encode it as utf-8 but not if you change that charset meta info or improperly add the xml header saying it is utf-8 when it is not.
A better technique is to use a python script to read each html file in as iso-8859-1 (sometimes called latin-1) and recode it and write it out as utf-8.
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