Are you using any plugins or a custom theme? It looks like your URL output is being
encoded. Exactly why this is occurring is impossible to tell at this time. Are you doing any manual outputting of the_permalink() or get_permalink() or is your theme doing any URL encoding? Take a look at the slug in the posts table in the database (post_name field). Are the percent characters in there? Were there any character set changes done to your database? From your post it seems like you are using standard ASCII characters.
Unless you can find a quick solution, we are going to have to try to narrow down the problem. If the post slug looks fine in the database, we know the problem isn't there. Also, does this encoding problem go away if you
change the permalink format? Try changing it to different things temporarily and see.
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