XML, strings and foreign (swedish/danish) characters

I'm on the point of almost giving up trying to get XML and PHP to sing along, but I'll throw out a question here first. I'm having severe problems getting PHP and XML to work with XML-files that contains foreign characters. Doesnt matter if i type the foreign characters in by myself hardcoded in the PHP-script, or if I get them from external XML-files, or if I get them directly from the database. utf8_encode() helps a bit, in the way that it makes the script work at least, but instead of the string "mængde" PHP outputs "mængde"… Is there any way to get XML to work together with PHP, or should I simply resign and try with ASP instead? Very thankful for any help that points in the right direction… Sincerely Victor