Yes, I absolutely agree. Default utf-8 support for all PunBB future versions.
Of course, converting PunBB 1.2.11 to UTF-8 is quite easy, especially if the server runs PHP 5.x and MySQL 5.x.
It is even not that difficult to have it as "real" XHTML by sending application/xhtml+xml in the header (for browsers that support it, of course).