I use Tamino 188.8.131.52 with XSLSTSX installed.
I tried the Nascar example and it transformed well.
When I changed the name of nascar driver Dale Earnhardt to Dale
This error message basically means that the encoding of the XML document is not what the XML declaration says it is. Most likely, the XML document is encoded in iso-8859-1, but it doesn’t have an XML declaration, so the default of UTF-8 is being assumed.
I’m afraid I don’t know enough about your configuration to know what is causing this problem.