Interesting.
I just read that mysql actually uses CP125 for Latin1 instead of Latin1/ISO-8859-1. I guess because Latin1/ISO-8859-1 is a subset of CP125.
Code:
| CHARACTER_SET_NAME | DEFAULT_COLLATE_NAME | DESCRIPTION
| latin1 | latin1_swedish_ci | cp1252 West European
I guess data posted through forms is not governed by the page character set, so would get through.
The forum software does correctly convert characters outside CP1252 to entities for storage in the database.
If I try to add non CP1252 characters to the database directly, It just throws an error.
UPDATE: I just tested changing the forum charset to be windows-1252 and that also results in our issue being resolved, as the apostrophes etc. are no longer converted to entities in quick reply and so avoid the swear filter.