I think the root cause of the problem you are facing is desctibed in the below excerpt
Note If you use the ALTER DATABASE command in SQL Server 2000 to change the collation of a database, the collation of the columns in the tables is not automatically changed. To change the collation of the columns, use the ALTER TABLE command and the ALTER COLUMN command. If you are using DTS, you can create the table and the columns with the appropriate collation before you transfer the data or you can use the Use Collation option. If you are using DTS and the table with the appropriate collation already exists, make sure to disable the Drop Existing Objects First option before you run the package.
See the below site for more details
http://support.microsoft.com/kb/325335
You need to identify the fields in the tables which contain arabic data and change their colation as follows:
ALTER TABLE test ALTER COLUMN value varchar(20) SQL_Latin1_General_CP1256_CI_AS
The beter way is to create a database with the same collation as the main one and then restore from the main to the newly created one.
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