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1) I send an email that has quotation marks. When the person replies, I see that my quotation marks have become: " and ". What do I need to set in preferences so these are universally seen as quotation marks?
Your quotation marks are seen correctly by the recipient to begin with. The error creeps in when they replay to you, and their email client incorrectly pretends (lies) that the sender's message is being sent in basic 7-bit ASCII, when in fact it isn't, since it contains curly quotes and apostrophes. Since it sends its message actually using Windows encoding for these characters you'll see the wrong characters on your Mac, but the recipient will have seen the right characters (at least the first time). As you can see your example didn't work very well - they came across as curly quotes in Entourage anyway.
To ensure this won't happen, even with recipients who have stupid email clients, go to Tools/AutoCorrect/AutoFormat, and uncheck the box that says to replace straight quotes with smart quotes. Then they will always appear as "quotes" under all circumstances.
2) Is there any way to turn off curly quotes (aka smart quotes) when typing text in HTML mode? The curly quotes turn out to be commas (,) when the email msg is displayed on non-Mac users in our office.
Entourage X and 2004: Tools/AutoCorrect/AutoFormat/ Replace smart quotes with straight quotes.
Entourage 2001: Tools>AutoCorrect>AutoFormat As You Type>Replace as you type> and uncheck 'Straight quotes' with 'Smart quotes'.
Curly quotes are usually called smart quotes and are preferable over straight quotes.
I don't see any settings about smart quotes or regular quotes. Anything I can change so my quotation marks are received as I sent them?
Three things you can do: