I am mucking around during my wordpress theme's loop_single.php to output the publish title in lowercase. My content has non-ascii chars and so i thought the next works:

<?php echo mb_strtolower(the_title()); ?>

But it doesn't work. It simply results the title in the manner it's written.

have you try

<?php echo mb_strtolower(the_title(),'UTF-8'); ?>

What about simply using CSS?

h1.post-title { /* or whatever the selector is */
    text-transform: lowercase;
}

https://developer.mozilla.org/en/CSS/text-transform#Values