I’ve got the same problem, but with WP 2.0.1.
I’ve got a blog in russian and native WP search doesn’t work properly when i try to search for words in russian. When i search for words in english (like “web”) the search operates quite well, but with russian words it fails – it simply displays all the posts.
I installed above mentioned plugin, Search Reloaded, but that didn’t help me.
May be the problem is in encodings? My blog is in UTF and mysql database which i use for wp is in WIN1251. So may be i need to encode the search terms to WIN from UTF before querying the database?
If so, can someone point me to the place in code where i need to do it?