Why don't I get a LATIN1 encoding here with SET ENCODING?

I'm tracking another bug, but wanted to verify stuff on the command line.  I can't figure out why this did not
work:<br/><br /> # psql dblack3-deleteme<br /> Welcome to psql 8.3.8 (server 8.3.4), the PostgreSQL interactive
terminal.<br/> dblack3-deleteme=> create table bryce1 (key int,val1 text,val2 bytea);<br /> dblack3-deleteme=>
\encoding<br/> UTF8<br /> dblack3-deleteme=> SET CLIENT_ENCODING TO 'LATIN1';<br /> SET<br /> dblack3-deleteme=>
\encoding<br/> LATIN1<br /> dblack3-deleteme=> insert into bryce1 values(1,2,'test\177');<br /> INSERT 0 1<br /><br
/>dblack3-deleteme=> insert into bryce1 values(1,2,'test\375');<br /> ERROR:  invalid byte sequence for encoding
"UTF8":0xfd<br /> HINT:  This error can also happen if the byte sequence does not match the encoding expected by the
server,which is controlled by "client_encoding".<br /><br /> dblack3-deleteme=> insert into bryce1
values(1,2,'test\200');<br/> ERROR:  invalid byte sequence for encoding "UTF8": 0x80<br /> HINT:  This error can also
happenif the byte sequence does not match the encoding expected by the server, which is controlled by
"client_encoding".<br/><br /><br /> ------------------------------------------------------<br /><br /> The underlying
problemis a version upgrade of DBI drivers has broken some binary objects we used.<br /> For the binary data:<br
/><spanclass="Apple-style-span" style="border-collapse: separate; color: rgb(0, 0, 0); font-family: 'Times New Roman';
font-size:medium; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height:
normal;orphans: 2; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><span
class="Apple-style-span"style="border-collapse: collapse; font-family: arial,sans-serif,'Arial Unicode MS'; font-size:
13px;"><div><fontface="'courier new',
monospace"><12><1>5<0><0><0><4>FOO1</font></div><div><fontface="'courier new',
monospace"><10><205><0><0><0><4>FOO2</font></div><div><fontface="'courier new',
monospace"><br/></font></div><font face="'courier new', monospace">Going in like so:</font><br /><div class="im"
style="color:rgb(80, 0, 80);"><div><font face="'courier new', monospace">$sth->bind_param($index++, $data, {pg_type
=>$SQLDb::PG_BYTEA});</font></div><div><font face="'courier new', monospace"><br /></font></div></div><div><font
face="'couriernew', monospace">It now comes out munged:</font></div><div><span style="font-family: 'courier
new',monospace;">\012\001 5 \000 \000 \000 \004 FOO1</span></div><div><font face="'courier new', monospace">\010 \377
\000\000 \000 \004 FOO</font></div></span></span>