I had a similar problem and tried all settings i could find on the web – in vain.
In my case the problem was the configuration of FreeTDS itself. On Linux the file is /etc/freetds/freetds.conf
I had to change the Version to 7.0 (maybe other numbers work, too. i just tried 7.0)
[global]
# TDS protocol version
tds version = 7.0
After this, the driver seemed to accept changes of the charset like.
ini_set('mssql.charset', 'UTF-8');
Btw: the change immediately is in effect, no need to restart anything afterwards