First, Latin-1 is the same as ISO-8859-1, so, the default was already OK for you. Right?
You successfully set the encoding to ISO-8859-1 with your command line parameter. You also set it programmatically to "Latin-1", but, that's not a recognized value of a file encoding for Java. See http://java.sun.com/javase/6/docs/technotes/guides/intl/encoding.doc.html
When you do that, looks like Charset resets to UTF-8, from looking at the source. That at least explains most of the behavior.
I don't know why OutputStreamWriter shows ISO8859_1. It delegates to closed-source sun.misc.* classes. I'm guessing it isn't quite dealing with encoding via the same mechanism, which is weird.
But of course you should always be specifying what encoding you mean in this code. I'd never rely on the platform default.