Thanks for your input. Here's a quick summary of what I've done so far with regards to charset and the database:
1. Exported the content from the 3.5.0 database.
2. Created a new database for the 3.8.4 installation with the utf-8 charset.
3. Imported the contents of the 3.5.0 database.
4. Run the various sql updates and associated scripts. 5. Run the SQL commands posted at the last entry in this post:
So far, I get attributes of the xml datatype displayed correctly. However, attributes built upon the textline datatype for instance, display special (Norwegian) characters incorrectly.
I also tried changing to utf-8 in i18n.ini, but that just made the xml blocks messy as well.