Are you sure that you are using version 1.7rc4? 1.6ST had some issues and in the 1.6 section of the forums if you search for german umlaut you will find a solution. I was under the impression that issue was remedied in 1.7x, but if it hasn't been then chances are the 1.6 german umlaut thread will point you in the right direction for fixing it. Lastly the devs have asked that bugs be posted on the github project.
https://github.com/osTicket/osTicket-1.7(https://github.com/osTicket/osTicket-1.7)