Thanks Soren for pointing out that.

I did a system parameter check ..
The only difference was in Mysql character set and collation ! eurika..

After running :
show variables like 'character_set%'

Machine 1:
character_set_client         latin1
character_set_connection utf8
character_set_database    utf8
character_set_filesystem binary
character_set_results      latin
character_set_server       utf8
character_set_system    utf8
character_sets_dir          C:\Program Files\MySQL\MySQL Server
5.0\share\charsets\

Machine 2:
character_set_client         utf8
character_set_connection utf8
character_set_database    utf8
character_set_filesystem binary
character_set_results      utf8
character_set_server       utf8
character_set_system    utf8
character_sets_dir          C:\Program Files\MySQL\MySQL Server
5.0\share\charsets\
==============================
BUT :
When I run this it sets it temporarily

set character_set_client='latin1';
set character_set_results='latin1';

And when I try to display the variables again they are still the same (
unchanged )

------------------------------------

You pinpointed also that there could be a problem while migrating the
database. I checked that they are the same !

All collation variables where different now both machines are the same.

I am going crazy now.. not knowing what to do.

I am running windows XP on both machines.