I got the exactly same problem, when I check the databases, I can see its in utf-8 but as soon as I run trough the update.php page, it seem that every post, comment and title transform to iso8859-1:
if I check my main page, I see garbled text but if I switch the browser character encoding to iso8859-1, I can see correctly french and western european accentued characters but asian one keep displayed wrongly.
Im using MySQL 4.1 with
default-character-set = utf8 set to the [client] and [mysqld] sections
and my locales are fr_FR.UTF-8