Steps to reproduce:
1. Create a new post or find a post containing a smiley.
2. Report that post
3. View the report in the MCP, look at the post text.

The smilies in that post will not show up, but display properly in viewtopic. Here is an example image URL for the big grin smiley on area51: http://area51.phpbb.com/phpBB/%7BSMILIES_PATH%7D/icon_e_biggrin.gif

Obviously,

is not being parsed. Now we need to find out why. I did test this on phpBB.com so it is not an issue in Olympus.