What would make a MySQL database create tables in a different collation other than its default?
Finally actually adding this to the question.
You must specify the COLLATION while creating the table. It will inherit the collation from the database which is latin1_swedish_ci. Wordpress sets the collation only for the connection, not for the database. E.g. for WHERE or ORDER BY clauses... See Answer and comment similar to this in link above.

hrake gets the credit not I