Two things are at play here.
First off, the fact that your title is arriving on the device with the apostrophe escaped is a bug in the Marketing Cloud UI that has been fixed, but not released.
Second thing is with regards to the Notification.Builder. The reason you're not seeing the title change when you use the setContentTitle method on the builder is because you've used the setupNotificationBuilder method to allow the SDK to create and populate the builder for you. setupNotificationBuilder sets a style on the notification to be NotificationCompat.BigTextStyle*. When this style is used the alert body and title are taken from what was set on that style when it was set. If you don't use setupNotificationBuilder and create/populate the Notification.Builder then you'll see the result you're looking for.
Additionally, you could use setupNotificationBuilder set your modified title and also set the style to null. This worked in my limited testing, but I'm not sure if there would be any side effects from doing this.
*If there is an image in the notification the style will instead be set to Notification.BigPictureStyle
Updated 4/23/18: With the release 213 Marketing Cloud release (today), the bug with apostrophe encoding has been corrected.