I had the same problem. All my Norwegian characters were showing up really weirdly after the upgrade, and I had to do a lot of update wp_posts set post_content = replace(post_content,'Ø','Ø'); to get things working again. I am waiting for version 2.2.1 before upgrading my other blogs…
I found this article on the Wiki: http://codex.ww.wp.xz.cn/Converting_Database_Character_Sets, but it looks unfinished and certainly not something that should be necessary when upgrading to 2.2.
I had the same problem. My Apache error log said
Permission denied: /home/<user>/<path>/.htaccess pcfg_openfile: unable to check htaccess file, ensure it is readable
The error occured whether there was a .htaccess file in the directory or not. The error went away once I made the directory writeable for the web server process. Try
Chmod 777 <wordpress directory>
