Relevant snippet from the book CLR via C#
Note When the Compare method is not performing an ordinal comparison, it performs character expansions. A character expansion is when a character is expanded to multiple characters regardless of culture. In the above case, the German Eszet character ‘ß’ is always expanded to ‘ss.’ Similarly, the ‘Æ’ ligature character is always expanded to ‘AE.’ So in the code example, the second call to Compare will always return 0 regardless of which culture I actually pass in to it.
You string "héllo" does not get transformed by character expansion internally, and so is not considered equal to "hello".