collation & UTF-8

I'm using PosgreSQL 8.1.2 on linux and want to load UTF-8 encoded varchars.
While I can store and get at stored text correctly, the ORDER BY places all
accented characters (Croatian, in this case - probably marked hr_HR) after
non-accented characters.
This is no showstopper, but it does affect the general perception of
application quality.

Now, I've seen the issue mentioned in a number of places, but often with
fairly old versions of pgsql (<8.0), in different circumstances etc. so my
question is:
is there an official way to set up UTF8 collation so that "SELECT first_name
FROM persons ORDER BY first_name" works as expected?

TIA,
Tomislav