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Thanks Tom. While it seems that search engines generally handle these characters well I still had to ask because I did two Google searches: One for "lole" and another for "lolë", and I got very different results. On the first search my website came up on SERP page one but on the second one we were nowhere to be found on any of the first 15 pages. Whats more, every one of the first 10 SERP pages or so contained at least one instance of the character with an accent in the title, description, or within the on-page copy. So it seems that special characters and regular ascii characters are not one in the same, or at least they are not weighted the same. I do have to agree with you on the fact that most users will not go through the trouble entering Alt codes on their search bars. On the other hand, the fact that we barely register on SERPs for the company's DBA name might be cause for some concern.

I think you'll find this post on the Official Google Webmaster Central Blog valuable.

I considered this but our shopping cart software is has a lot of "black box" features including this one, so I have no control over how this feature is handled. Also, we use SLI search with site champion, which does a very similar auto-generated landing page function for category facets so including this function again would be redundant and possibly dilute our indexed results.

This is something we will be experimenting with in the future. For now, I think we, as SEO's should be considering HTML5 as it will be the future of the semantic web. Until people start experimenting and trying it out we won't really know and I think there is a definite divide at the moment between HTML5 developers and SEO's. Theoretically, having an explicit , <header>, <nav>etc should make it quicker and easier for SE's to parse and as we know, Google likes things that make it's spiders job easier/quicker. But this is just hypothesis at the moment.</nav> </header>