In rev 212 encoding was set back to raw to store special charters as unicode text instead of tinyMCE converting them to html entities.
see: http://projects.ez.no/ezoe/forum/general/entity_encoding_raw_commented_by_default#msg25185

This seems to cause TinyMCE to encode   to unicode variant, witch is not understood correctly in most output (after save in editor and content output)

Possible solutions:
1. change entity_encoding back to default (named) but customize entities setting to not encode all charters but definitely   at least.
2. replace the Unicode charters that needs to be encoded in the input parser (should probably be done anyway for cases where oe parser is used to parse external html content) (  : U+00A0 / "\xC2\xA0" ).

Related TinyMCE docs:
http://wiki.moxiecode.com/index.php/TinyMCE:Configuration/entity_encoding
http://wiki.moxiecode.com/index.php/TinyMCE:Configuration/entities