Description of problem: If you have a folder containing UTF8 special characters (for example "~/Ã faire"), emacs can't open/save a file located in this folder. It says that the file doesn't exist.
Seeing this in Pheobe as well.
This is fixed in Emacs 21.3 as far as I can tell. Please try with the emacs in rawhide and if there is still a problem, please re-open this bug. Thanks.