Transcode does not compile with USE flag xml2 if libxml2 has not been previously emerged. The 'xml2' USE is not in the RDEPEND in the ebuild.
On a fresh 2005.1 install, doing an 'emerge transcode' yields an error when it tries to use libxml2. My understanding is that it's this bug (not a portage whiz...). Manually emerging libxml2 now, which I'm guessing will fix the bug.
Will cleanup transcode later today.
Fixed in 1.0.2-r1.