Before going any further, you should work with the source of the flat file to determine exactly what encoding and code page they are supposed to be producing.
Keep in mind, the encoding (ANSI, UTF-8, etc) and code page (Windows-1252) are different things. The easiest way to explain, in this context, is the code page is a specific interpretation of the ANSI character set.
And no, 1252 does not support 'all' characters, only Western European. However, if setting WE-1252 makes everything "work fine" then they are very, very likely sending ANSI text using the 1252 Code Page.
Here's where I think this is breaking down. The Code Page setting on a Flat File Schema is used by the disassembler to translate the platform specific WE-1252 characters to their comparable UTF-8 characters. So, what you get out of the Flat File
Disassembler is the UTF-8 translation of those characters. Xml does not support any Windows Code pages.
If the file is coming in as WE-1252 ANSI, then the source cannot send anything beyond that so, again, you don't need to worry about it, they couldn't send a high UTF-8 character even if they wanted to.
Alternatively, if they want to send full UTF-8, they can't use the WE-1252 code page with the lower 256, it just doesn't work like that.