BibTeX has huge problems with non-ASCII characters, even in the newest version. If you prefer a modern system, I'd like to recommend the combination of biblatex and biber. Both are still in beta stage, but they work quite well even in production environments. With this combination, most problems related to LaTeX bibliographies will vanish. As a side note, the biblatex documentation also contains a section about encoding issues with traditional BibTeX (§ 2.4.3).
