Languages

Sorry, I don't think I understand your problem to the full.
A few things: Moodle 1.7 is a UTF8 version. If installed correctly, that should all be ok. There where in the past some issues with Fantastico installation. It's generally not considered as a good way to install Moodle.
As for the Latin1 to utf8 setting: you can chage that in your database settings, using eg phpmyadmin (usualy found at domainname/phpmyadmin with a browser). Please make backups before playing with your database.
Those questionmarks can be caused by your browser too, eg if the right utf8 font is missing and the alternate font doesn't contain the correct characters.

Please give us some more information or, if the problem is solved, what has solved your problem for future reference.