I found the cause of my problem - after doing many hours of reading - to be a default PHP setting:

A PHP MySQL connection (...) defaults to a latin1 connection, so, your first query after connection should be:

mysql_query("SET NAMES 'utf8'");

* connection to a MySQL database
*
* @abstract
*
* @author Kazumi Ono
* @copyright copyright (c) 2000-2003 XOOPS.org
*
* @package kernel
* @subpackage database
*/
class XoopsMySQLDatabase extends XoopsDatabase
{
/**
* Database connection
* @var resource
*/
var $conn;

/**
* connect to the database
*
* @param bool $selectdb select the database now?
* @return bool successful?
*/
function connect($selectdb = true)
{
extension_loaded('mysql') or trigger_error('mysql extension not loaded', E_USER_ERROR);
if (XOOPS_DB_PCONNECT == 1) {
$this->conn = @mysql_pconnect(XOOPS_DB_HOST, XOOPS_DB_USER, XOOPS_DB_PASS);
} else {
$this->conn = @mysql_connect(XOOPS_DB_HOST, XOOPS_DB_USER, XOOPS_DB_PASS);
}

if (!$this->conn) {
$this->logger->addQuery('', $this->error(), $this->errno());
return false;
}

if($selectdb != false){
if (!mysql_select_db(XOOPS_DB_NAME)) {
$this->logger->addQuery('', $this->error(), $this->errno());
return false;
}
}
mysql_query('SET character_set_results="utf8"');
mysql_query("SET CHARACTER SET utf8");
mysql_query("SET NAMES 'utf8'");
return true;
}