When I create new folders everything works beautifully. Windows XP doesn't need any special settings to support the basic languages, which includes all of the Western European, to which those accents/characters belong.

It's most definitely a problem with the 8.3 names, which as mentioned, aren't an issue on newly created files/folders in Explorer (at least not after disabling 8.3 alias creation in the registry).

Let's ignore the "M.I.A." example though. That may be a special case as I can no longer access it even under Windows. That folder had an odd character instead of the last period and I renamed it earlier today to "fix" it. Now it can't be opened under Windows and doesn't show up at all under Mac OS. Nice.