I was going to tell the same thing.
The error is about the utf-8 new functions for the DB. I know because i have modified (to include UTF-8 better support using this diff http://trac.ww.wp.xz.cn/attachment/ticket/3517/charset.diff ) wordpress 2.1 and svn version of wordpress 2.2 and i have tried last svn version of wordpress 2.3 and i have always the same error.
Sidebar Widgets should create a major compatible tables with UTF-8
The error is: Plugin could not be activated because it triggered a fatal error
If you had the standalone widget plugin installed and enabled, disable it before upgrading to 2.2. That may help, I had a similar problem.