Normalize unicode string in SQL Server?

Sorry, no, there is no such function in any version of SQL Server to date (2012 test builds). Comparisons can be correctly composition-insensitive, but there isn't a function to convert character composition usage to one normal form.

It has been suggested for a future version of the ANSI standard under the syntax NORMALIZE(string, NFC) but it's going to be a long time before this makes it to the real world. For now if you want to do normalisation you'll have to do it in a proper programming language with better string-handling capabilities, either by pulling the string out of the database or by writing a CLR stored procedure to do it.