Can custom module function names contain characters between 7F and FF?
That's a bad idea. Please refer to Drupals Coding Standards under the section Naming Conventions. 

In my opinion function/class/var names shouldn't contain anything else than A-Za-z0-9_.

If you don't want isys_helper_form_alter to be picked up by Drupal, you can always prefix it with an underscore: _isys_helper_form_alter.

Update

Here's another topic on why other characters are bad: https://stackoverflow.com/questions/6362241/php-variable-function-class-names-using-special-characters. And even if you remember to save it in the right encoding, other people who needs to maintain your code later on might not do that.