I don't think it's a magic quotes issue. Wordpress handles situations where magic_quotes_gpc is on or off. In fact, Wordpress [strips any slashes that magic_quotes_gpc puts on $POST or $GET data and then [URL="http://codex.wordpress.org/Function_Reference/add_magic_quotes"]re-adds slashes](http://codex.wordpress.org/Function_Reference/wp_magic_quotes) itself. Wordpress expects data to be escaped.
You could test to see if magic_quotes_gpc is on by placing this in your footer.php file just ahead of the closing </body> tag:
echo '<p>Magic Quotes is on.</p>';
echo '<p>Magic Quotes is off.</p>';
Can you take a look at the post text in the database using phpMyAdmin or something? If you see slashes when viewing the post content, that is an indication that something is being double escaped somewhere. Are you using any plugins or applying any filters to content before it is being place into the database or being displayed, or are you manually escaping anything?