It should not be a charset problem... ok, it is related to the converting, but anyway, it should work.
You need to turn off magic quotes either in php.ini or in .htaccess:
http://www.php.net/magic_quotes
That should solve the problem.
About the editor, it's part of the
UsabilityInitiative.
Tell me when the problem still exists after turning off magic quotes.
And let me know if you have problems to install the new editor, I can help.