Yes, according to bugs.php.net this is a bug in PHP 4.3.2. Check info.php if this is your providers PHP version.
If I understand you correct, then this error happens, when a new guestbook entry is made?
As a workaround you can remove all references of html_entity_decode from modules/Guestbook/action.default.php. But then your notifying email will be sent with corrupted special characters, umlauts, etc.
Guestbook 1.1.1.0 Problem (cannot yet handle MBCS)
Re: Guestbook 1.1.1.0 Problem (cannot yet handle MBCS)
You could try changing all 'UTF-8' to 'ISO-8859-1' in modules/Guestbook/action.default.php
Re: Guestbook 1.1.1.0 Problem (cannot yet handle MBCS)
Fine! Thanks for reporting back.