Postgresql 7.2.1 and umlauts

Hi,

psql -V
psql (PostgreSQL) 7.2.1
contains support for: readline, history, multibyte

psql -l
List of databases
Name | Owner | Encoding
-----------+----------+----------
template0 | postgres | UNICODE
template1 | postgres | UNICODE
test | ata | UNICODE
(3 rows)

test=# show client_encoding;
NOTICE: Current client encoding is 'UNICODE'

Yet it is impossible to insert an umlaut into this database.

I have created a HTML form and a php function (4.2.1) that stores the
contents of this form in database "test" (in a table called guestbook).
Whenever I type in an umlaut character I get following error message:
for umlaut-a I get: Warning: PostgreSQL query failed: ERROR: Invalid
UNICODE character sequence found (0xe40000) in /var/www/dc+da/em.inc on line
63

for umlaut-u I get: Warning: PostgreSQL query failed: ERROR: Invalid
UNICODE character sequence found (0xfc0000) in /var/www/dc+da/em.inc on line
63

for umlaut-o I get: Warning: PostgreSQL query failed: ERROR: Unicode >=
0x10000 is not supoorted in /var/www/dc+da/em.inc on line 63

for a sharp-s (szlig in html specialchar notation) I get: Warning:
PostgreSQL query failed: ERROR: Invalid UNICODE character sequence found
(0xdf00) in /var/www/dc+da/em.inc on line 63

Also notice the spelling mistake in the output for umlaut-o: supoorted
instead of supported.

line 63 is very simple:
$result = pg_exec($database,"INSERT INTO guestbook ....");

I have tried some php functions to change the character encoding
mp_convert_encoding for example or pg_setclientencoding but nothing helped.
Either the error message was shown or the wrong character is inserted into
the database or nothing is inserted.
This shouldnt be with unicode shouldnt it?

So how do I insert umlaut characters in postgresql version 7.2.1 and higher?

TIA,
Atahualpa