This error message probably means that you have not installed your moodle database with the UTF-8 encoding, as required by Moodle (since 1.9 in fact). Is that a brand-new moodle install or an upgrade from an earlier moodle version and if so which version?
Did you insall the database yourself or your internet provider installed it ? Which type of database is it : mysql, MSql, PostSQL, etc.?
I have just tried the glossary entry you suggested and it works OK on my Moodle 2.0 test site.
Please check your moodle database encoding.
Joseph
