I'm not sure what "both places" means relative to the CHARSET: Do you mean both admin and store? What about the DB_CHARSET, present in the configure.php files?
I meant in both #1 and #2 in the list of three things you indicated. But yes it is also "iso-8859-1" in both admin and store.
At this point, I believe it has to do with the particular character since many other special characters are fine.
That could be the issue; the DB_CHARSET value (present in the /admin/includes/configure.php and /includes/configure.php files) should be either latin1 or utf8, not iso-8859-1.