However, in my output HTML I see the copyright symbol
preceded by a capital A with something on top:  ©

How do I get rid of that unwanted character?

did you try to specify the output-encoding in your stylesheet?
e.g.: <xsl:output method="html" encoding="ISO-8859-1" />

I use Xalan 2.2 and the XSLT output is created inside
a template that just copies the following:

<p>Copyright &#169; 2002 Company, Inc. All rights reserved.</p>