As of v 1.2.x, WP is *deleting* any accented characters in the post title when it generates post slugs. It would be much better if it converted all those to their corresponding base latin characters.
Over at the Textpattern forums, there's an accented-to-latin conversion function, and the author is willing to share it with anyone. I have created the conversion table, and it works with all the accented characters in the latin-based alphabets.
WordPress could benefit from this too. Any chance for a developer to integrate this and submit the changes?
NB: I've noticed the work , but it seems it has issues.