Thanks! Looking at it I don't think the problem is the encoding. Rather, Trizbort sees "On the old" as a potential room, which is wrong. Maybe there could be a way to ignore certain phrases? Or sharpen up what Trizbort sees as a sentence?
If I replace "On the old, wooden table is a blue book." with "You see a blue book on the old, wooden table" then it is okay.
If I replace 0xa with 0xd 0xa, we still have the room-misreading problems.
So this looks like a word parsing issue and not a character set thing, which is a relief.
One odd thing though is that Lectrote sends out a bunch of null characters after each command. This isn't critical, but it doesn't look right in Notepad++. I might report a (low-priority/impact) issue with the file you attached, if you haven't.