See the following artciles:
Description of storing UTF-8 data in SQL Server (the article points to SQL
7/2000, but 2005 still uses UCS-2)
http://support.microsoft.com/kb/232580
UTF8 String User-Defined Data Type
http://msdn2.microsoft.com/en-us/library/ms160893.aspx
International Features in Microsoft SQL Server 2005
http://msdn2.microsoft.com/en-us/library/bb330962.aspx
HTH,
Plamen Ratchev
http://www.SQLStudio.com