If you are using Mercury/32 with personal names that use high bit characters you should replace the ~p with the ~o in the user defined gateway. This will allow your highbit characters to be used properly. Here's what the UDG should look like when viewed with pconfig.exe run from the WinPMail program directory.
Gateway name : MERCURY
*New mail path :
Is ? a program to run? : N
*New mail search mask :
*Outgoing mail path : C:\MERWIN\QUEUE
*Run for outgoing mail :
*Filename format : ~d~d.101
Run to validate address :
*Reply address format : ["~o" <~L~Lfirstname.lastname@example.org?
Accepts SMTP addresses? : Y
Simple message headers? : 'Glue' headers
UUEncode attachments? : Y
Burst messages? : N Gateway processes BCC? : N
Strip gateway name? : Y
Force all mail through? : N
Format Pegasus Mail should use to compose the 'From' field for
the message. ~8 or ~n indicate where the name should be placed.