Single-quotes and double-quotes problem in posts

I just upgraded to WP 2.5.1 today and I’m having problems writing/editing posts now. It seems that whenever I use a single-quote or double-quote ( ‘ or ” ) in any of my posts, WP is trying to escape them when it saves the post. What I mean by this is it converts all single-quotes to back-slash single-quote ( from ‘ to \’ ). This happens whether I’m using the visual editor or the HTML editor for posts.

This effectively means that no links work in any of my posts now, or any other HTML tag that has any attributes (since I can’t use quotes to enclose the attribute). This has broken the posting feature entirely for me. I did a straight forware delete and replace with all WP files from the latest release, so I don’t have any stragglers from WP 2.5. It is effectively a fresh install attached to my existing database. Any help??