I have never really got ÅÄÖ to work properly on my system before. I got it working in samba but when doing ls at a tcsh prompt the files were full of questionsmarks. So started to search and read what to do. First I found that one could in newer versions of samba set different character codings for dos and unix. But still in my shell things looked weird. After a bit of more searches I found that there is a .login_conf to set these things. So by setting the charset to iso-8859-1 it all worked.
me: :charset=iso-8859-1: :lang=sv_SE.ISO8859-1:
display charset = iso-8859-1
unix charset = iso-8859-1
dos charset = utf-8