question 1: Yes, it's possible
ALTER DATABASE `test` CHARACTER SET utf8 COLLATE utf8_general_ci;
but You have to be carefull if nothing will change after switch. Only english, will change easyly... special characters could be a problem.
question 2: You have to read more: http://dev.mysql.com/doc/refman/5.5/en/charset-general.html because there are issues like sorting, charset range...