If the master uses MySQL 4.1, you must always use the same global character set and collation on the master and the slave, regardless of the slave MySQL version. (These are controlled by the --character-set-server and --collation-server options.) Otherwise, you may get duplicate-key errors on the slave, because a key that is unique in the master character set might not be unique in the slave character set. Note that this is not a cause for concern when master and slave are both MySQL 5.0 or later.

If the master is older than MySQL 4.1.3, the character set of any client should never be made different from its global value because this character set change is not known to the slave. In other words, clients should not use SET NAMES, SET CHARACTER SET, and so forth. If both the master and the slave are 4.1.3 or newer, clients can freely set session values for character set variables because these settings are written to the binary log and so are known to the slave. That is, clients can use SET NAMES or SET CHARACTER SET or can set variables such as collation_client or collation_server. However, clients are prevented from changing the global value of these variables; as stated previously, the master and slave must always have identical global character set values. This is true whether you are using statement-based or row-based replication.

If you have databases on the master with character sets that differ from the global character_set_server value, you should design your CREATE TABLE statements so that tables in those databases do not implicitly rely on the database default character set. A good workaround is to state the table character set and collation explicitly in CREATE TABLE statements.