Hi Mike (+future users!),
I have the same problem as you and after a long chat with support it looks as though CE doesn't support encoding of characters for arabic.
Here's what seems to be the encoding chart:
http://en.wikipedia.org/wiki/ISO/IEC_8859-6
Our SQL 2005 database does not seem to support arabic chars, so encoding them would be a great way around this.
Hopefully CE will maybe introduce encoding for arabic characters in the future ;-)
Regards,
Marcus