I've had first hand experience with the utf-8 database migration because i upgraded our moodle from 1.5 to 1.7, last year.
From Moodle 1.6 onwards, all language packs are converted to utf-8 and different languages may be used on the same page. Moodle 1.6 and 1.7 include a utility to migrate your database to utf-8.
From Moodle 1.8 onwards, the database migration utility is no longer included, as it is assumed that you upgrade from a utf-8 encoded database.If you want to upgrade from 1.5.3, you must first upgrade to 1.6 or 1.7, migrate your database to UTF-8, and then upgrade to 1.8 or 1.9. Read this documentation.