BHK,
thanks for your message; from a server perspective, Arabic will just work as any character sets supported by the Linux GNU/iconv framework. You can check yourself at
http://www.gnu.org/software/libiconv, but CP-1256 is on the list, as is ISO-8859-8 and obviously all flaviours of Unicode including UTF-8.
On the client side, I would expect no major issues in standard IMAP clients as well as in Outlook; the one thing I'm not sure about at this point is SWA - not because of the character set support, that obviously comes from and through the browser, rather because of the right-to-left script Arabic is using.
We'll see how it goes. If you could tell me a bit more about your business case and your role in all this, it might be helpful. You can also contact me directly as <givenname>@scalix.com, if you want to take this "offline".
Thanks,
Florian.