I am back. Thanks again for all the help.
I have ditto 2.0.2. I tested the output by using pagetitle as the sortBy parameter and it seemed to be working right, so I guess that the customsort feature gets called when using anything other than the default document variables. Since I am using a tv as my sortBy parameter it is going through the strnatcmp() function which is chocking on the umlat.
The immediate work around would be to use pagetitle as the sortBy, not ideal for me since I was planning something else.
I will reopen an old post I have in the Ditto forum regarding this issue when I first noticed it and cross link them for reference.
--->>>> Moved to ditto forum for furthur discussion --->>>>
http://modxcms.com/forums/index.php/topic,18631.0.html