Bug 1 is there, thanks for the report.
Bug 2 is not really a bug. Choosing an encoding from the popup does NOT convert anything but only changes the encoding used to display the raw characters.
Bug 3: the "Invalid Encoding" message should be instead: "Lyrics could not be displayed using the selected encoding. Choose the right source encoding from the encodings menu and retry".
Your suggestion: Encoding conversion to UTF-8 may be added as a new feature. You'll be asked to specify source text original encoding to make things working as expected.