Looking at moodle 1.9 in IE 8 email addresses are being displayed correctly on screen for me. If you hover over an email address the mailto link displayed in the progress bar at the bottom left of the browser has a %40 where the @ should be. If I click on the mailto link it it takes me to hotmail with the address corrected.
There may be two problems for people actually obfuscated email address all the way through to their email client. IE isn't switching from the hex representation of @ to the @ character itself and people's email clients aren't doing the substitution either. Although I suppose the email client is probably correct in assuming that the browser will give it an unobfuscated email address.
It would be easy to add checks for the @ symbol to the obfuscation functions so it is always passed through as is. That would fix this for people where the %40 is the only problem they see. For people who are seeing entirely obfuscated email addresses, IE 6 mostly by the sounds of it, this wouldn't really help.
On the view user page (user/view.php) the user's email address is always obfuscated regardless of whether or not email protection filter is enabled. If this page checked that the email protection filter was enabled before obfuscating people could at least turn it off if they are experiencing problems.