I tested it with the console.
$ python manage.py shell
>>> from myapp.models import Product
>>>
>>> p = Product.objects.all()[0]
>>> print p.name
>>> 'Chia Seeds'
>>> p = Product.objects.filter(name__istartswith='chia s')
>>> print p
>>> []
Using Django-Trunk (1.4a1) and MySQL 5.1.49-1ubuntu8.1
Is it a problem of MySQL? Or what else?
I think this is discussed here: https://code.djangoproject.com/ticket/9682
I myself never used MySQl so I do not know for sure, but it seems that you need to use an appropriate database collation setting for this to work.