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A couple of similar threads have been started around here. This is one of them. I saw another the other day, but it's probably swimming deep in the ocean of forgotten MR threads...

it seems to be a problem with non-ASCII characters in MP3 files with old ID3 tags. One solution I read was to select all the affected songs, and click Advanced -> Convert ID3 Tags.

I run iTunes 7.7 on Mac OS X 10.5.4, and all my non-ASCII characters appear fine in 256kb/s AAC files.
 
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