Jonathan:
to prevent this problem from reocurring, can't there be a line of code in the setup that checks for utf8? If It's not utf8, the install fails, no matter what.
Well, that feature is provided by the moodle 2.0 install script. If you try to install moodle 2.0 with a database whose collation is not set to utf8 (e.g. latin1_swedish_ci, etc.), then the install script does stop with the following warnings:
Moodle 2.0.2+ (Build: 20110413)
Server checks
Name Information Report Status
unicode must be installed and enabled
It is required that you store all your data in Unicode format (UTF-8). New installations must be performed into databases that have their default character set as Unicode. If you are upgrading, you should perform the UTF-8 migration process (see the Admin page).
[...]
You must solve all the environmental problems (errors) found above before proceeding to install this Moodle version!
And you cannot proceed with the installation. Just like you requested.
The problem in your case seems to be that you did not install moodle yourself but you rely on the "simplescripts" organisation (of whom I do not know). Again, you should take your problem to them, not to moodle.org, and ask them a) why they set your moodle database to latin1_swedish_ci rather than to uf8_general_ci and b) how they could have "installed" a moodle 2.0 version with that database collation, since it is not possible to do so.
Hope that helps.
Joseph
PS.- To show your appreciation of help given in these forums, you may either say "thank you" in one of your replies or select "Useful" in the Rate dropdown list (or both) .