No, you don't have to change the forum to UTF-8. It's better to use than ISO-8859-1, but the mod doesn't force a change across your entire board.
VaultWiki doesn't really care about your username format. It can be however you had it configured in vBulletin already.
I'll be updating Lite for 4.1.4 over the next few days, now that the kinks in the full version were worked out.
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