Is it possible to override .Net classes been used by PowerBuilder itself?
No, not really. That's one of the benefits of WCF that PowerBuilder shielded us from with their implementation. They have enumerated types for all of the classes that .Net provides, but no mechanism to create our own .Net class and use it instead of a .Net provided class. WCF, at heart, does have that capability.
However, the last I saw on this, the error message about encoding was being returned by the service PB was calling, not by the PB WCF client. Changing the class that the PB WCF client uses wouldn't made any difference if that is the case.