I have this problem with Arabic characters. I'm using phpmyadmin to handle the database. I've created small web application with php. It takes the text store it in the DB and retrieve it when needed. When I explore the text using phpmyadmin, the text looks like this: http://www.ayyash.com/blogimg/utf.gif
Also when I retrieve the text from the application I did, it does appear right except some characters that appears in funny way.
The php pages are set to use UTF-8 and the same with MySQL.
When using MySQL 4.0 and previous ones, the problem disappears.