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XOOPS supports php 5 since version XOOPS 2.0.10, could even have been since 2.0.9 - not quite sure anymore. Not all modules support it yet though.
And you certainly can use UTF-8 with XOOPS - I have no idea why he would think otherwise.
I tried to have a look at Glossword...
- the files at SourceForge are only available in formats that required me to install a new archiver and after installing that I still had to decompress the .rar file it presented me with... a lot of bother just to look at some files
The fact that it uses PHP 5 shouldn't stop anyone from making a module from it - any current version of XOOPS could handle it. It may limit the amount of Xoopsters that can use it now, but the hosting companies will catch up soon enough.