I just discovered that there are two issues in chamorro.conf for version 2.7 of the Chamorro module.
(a) The conf file itself is not UTF-8 encoded
(b) The following line is missing, and default encoding is Latin-1
Although the module text was displayed OK in Xiphos, it was not correctly displayed in xulsword.
Adding Encoding=UTF-8 solves the xulsword issue, but see further below in my added comments.
Converting the conf file to UTF-8 without BOM also fixes some display issues for the text in the About line.