Not only could you, this actually happens in practice. Not necessarily ISO-8859-1, but specifically SHIFT-JIS, a Japanese encoding that you will run into if you run old Japanese software. To make things even worse, SHIFT-JIS is almost entirely incompatible with any form of UTF based encoding, and depending on the attempted normalisation you can quickly end up with paths that have been messed up multiple times in a row.

I forgot what Japanese emulator I tried to run when I found all of this out, ut sufficed to say I didn't enjoy the experience.

Except that Linux does support several filesystems that do claim to store the filenames in a specific encoding and therefore the kernel must do conversion. Mostly Windows FSes, but nowadays case-insensitive ext4 also applies.

Even better: Each user can have his own locale and charset, and may even change that per program/shell/session. One may save filenames as UTF-8, one as ASCII, one as ISO8859-13, one as EBCDIC.

However, the common denominator nowadays is UTF-8, which has been a blessing overall getting rid of most of the aforementioned mess for international multi-user systems. And there is the C.UTF-8 locale which is slowly gaining traction.