Ok,
here is what I found:
in what you used to print entries:
echo stripslashes(htmlentities(utf8_decode($entry['entry_content']))
I removed htmlentities and utf8_decode completely, thus leaving only:
echo stripslashes($entry['entry_content']);
that combined with UTF8 coding set in database tables solves the problem.
I have done similar in frontend/read.php lines 149 (author name), and 158 (entry content); and in admin/entries.php lines 291 (content) and 304 (author name).
I am not exactly an expert, but I guess it will work fine in most languages.
It works for me, so I am happy now ?? hope it helps you as well.
Thanks,
GReg