I was stunned to realize that the Mac OS X Tiger terminal doesn't support accents (and other non-ASCII characters) by default. This includes pasting accented characters in the terminal, listing files with accents in their names, etc.

In fact, this is not really a question of the terminal: it seems that the versions of bash, ls, and other core utilities that come with Tiger are too old and don't support UTF-8. Wow: Tiger came out in 2005. Didn't Java have support for UTF-8 back in 1995 already? This is 2007 and just the kind of things that should work out of the box, right?

Anyway, I had some luck by installing MacPorts and following the suggestions in this post, although this still doesn't work well with iTerm which is unable to combine diacritics.

But maybe I am a little unfair as I am still using Tiger. Please tell me that this is now fixed in Leopard.