Okay, I FINALLY figured it all out.
The only problem was the BOM which Notepad added to the PHP. I used Ultra Edit to save the exact same file without the BOM ('UTF-8 NO BOM' is this case, but UTF-16 NO BOM worked as well) and it worked all perfectly.
ASCI/ASCII did not work. I don't know why that is but at least the error is solved now. Took me about a week of headaches and trying!