If "correct handling of apostrophe's and quotation marks, keeping the
string length unchanged, and only changing desired letters from lower to
uppercase with no other side-effects" is the criterion we want, then
what I suggested (toupper() the first character, and any character that
follows a space or punctuation character) should work. (Unless I'm
missing something.) Do we want to tolower() all other characters, like
the interpreter does now?

I can make a test and patch for this if this is what we decide.