This seems to be this problem:

http://forums.atlassian.com/thread.jspa?threadID=6189&tstart=0

Outlined by this bug report:

http://bugs.mysql.com/bug.php?id=4541

This appears to still be a problem - I had one other user report this
this morning:

"Confluence?? Since is
built on top of Spring/Hibernate and Lucene .. was a second nature for
me to understand it and install it. I was even able to install it on a
mySQL server supporting utf-8 as the default collation .. moment when
the default installation failed (osproperties failed .. for index key
too long .. BTW I hope you know about this issue, do you?! I wonder if
any of your customers complained so far about this issue: Confluence on
mySQL with utf-8 enabled. If not, it means I am the only one seeing this
problem, which is good "

Can we raise an issue, and look to fix it?