Umlaut characters are converted to HTML entities by WLW. Drupal itself sanitizes the title of blog entries and converts all '&' characters to '&' .
So I read the HTML entities in my blog titles...
Example:
german word 'für' gets converted to "für" by WLW which gets converted to "für" by Drupal which you read as "für" in the browser.
In the meantime I hacked drupal's blogapi to convert HTML entities back to ISO-8859-1 when posting. I can wait for the next release...
BTW
Many thanks for the great product. Reminds me to the "good old days", when the first Beta release of "Internet Mail & News" made me switch from SUN deskop to the PC. Live Writer made me start blogging.
You demonstrate that there are people working for Microsoft, which share our ideas and our needs. And who are able, to use modern software techniques to build great tools.