No generally not! But MySQL has confirmed a bug that causes the MySQL server to crash when the server has UCS2 as the default character set and a client attempts to connect. MySQL versions 4.1, 5.0 and 5.1 are affected.

It happens when connecting not only with SQLyog, but also PHP and MySQL's own GUI tools (MySQL Administrator, MySQL Query Browser). Probably any client (at least), that uses the C-API. MySQL command-line client is not affected. At this point of time it is not clear if the same thing happens with other connectors (ODBC, JDBC, Pearl, RUBY, Delphi wrapper class etc.)

It also is not yet clear if all mySQL 4.1, 5.0 and 5.1 versions are affected or if it is only the most recent builds. Read about the bug here: http://bugs.mysql.com/bug.php?id=18004

You can still use UCS2 charset as default for databases, tables and columns - but not as default for the server! 

Write-up March 23rd 2006: MySQL has now committed a patch for this. It will be effective from MySQL versions 4.1.19, 5.0.20 and 5.1.8