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Thanks Carlos. The form is working now. It took me creating a brand new form. I tested it with and without special characters. I does NOT work with special characters, but does without them. Fortunately, the answers that users provide in the form boxes may contain special characters. If not, it would have been disastrous!
FYI - This IS a change in function. It used to work fine with special characters.
You can set the Payments Standard language encoding in your PayPal profile: https://www.paypal.com/cgi-bin/customerprofileweb?cmd=_profile-language-encoding
So with your current setup- you are not allowing the charset to pass with your setting. However, you do have the ability to change the charset in order to pass special characters.
Hope this clarifies.