After reading over this thread and checking some line numbers, you are using PhpDig 1.8.8 RC1 with MySQL 4.0.20a, but MySQL didn't come out with UTF8 support until version 4.1:
http://dev.mysql.com/doc/mysql/en/charset-unicode.html
PhpDig Version 1.8.8 RC1 Requirements:
http://www.phpdig.net/forum/showthread.php?t=1789
PhpDig Version 1.8.7 Requirements:
http://www.phpdig.net/navigation.php?action=doc#toc3
As you are using MySQL 4.0.20a with PhpDig 1.8.8 RC1, it would seem that the query is failing because MySQL 4.0.20a doesn't understand the _utf8 bit in the query, so this isn't a bug. 
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