Do you have the problems with text in the backend? If so enable UTF8 language file support in system tab (should be enabled by default on J1.5+).
When umlauts are not stored correctly in your database because your DB tables are not UTF8 capable, select base64 encoding for messages in messages tab (or obfuscating if you like).
In all other cases it is a problem with your template.
uddeIM & uddePF Development
CB Language Workgroup
CB 3rd Party Developer