I have recently upgraded my ForlderShare to the last windows live one.
The behaviour seems the same and it still support syncing Hebrew filenames.
Alas, when I tried to add a library to the sync using the website - a new
problem came. The new site does not support showing Hebrew (and I assume any
other non-English) names - library or filename. It shows "gibberish" instead.
As I remember, in the last version of the site this worked fine. What has
happened?

This is what Christoph of MSFT had to say:

Unfortunately FolderShare today only supports the 6 languages (EN, ES, IT,
PT, DE, FR). While we can not promise specific dates, Unicode support is
definitely high on our priority list and we are working hard on fixing the
problem.

See full post here:
http://www.microsoft.com/communities...c49058&lc=1033