This didn't work for me. My MSIE now seems to be using double byte code for international characters. My workaround for World categories is:

Find:
# $pod_url=&pod_escape($pod_url);

After that line, add (but see note below):
# uppercase
$pod_url =~ s/À/\% c0/g;
$pod_url =~ s/�/\% c1/g;
$pod_url =~ s/Â/\% c2/g;
$pod_url =~ s/Ã/\% c3/g;
$pod_url =~ s/Ä/\% c4/g;
$pod_url =~ s/Ã…/\% c5/g;
$pod_url =~ s/Æ/\% c6/g;
$pod_url =~ s/Ç/\% c7/g;
$pod_url =~ s/È/\% c8/g;
$pod_url =~ s/É/\% c9/g;
$pod_url =~ s/Ê/\% ca/g;
$pod_url =~ s/Ë/\% cb/g;
$pod_url =~ s/Ì/\% cc/g;
$pod_url =~ s/�/\% cd/g;
$pod_url =~ s/ÃŽ/\% ce/g;
$pod_url =~ s/�/\% cf/g;
$pod_url =~ s/�/\% d0/g;
$pod_url =~ s/Ñ/\% d1/g;
$pod_url =~ s/Ã’/\% d2/g;
$pod_url =~ s/Ó/\% d3/g;
$pod_url =~ s/Ô/\% d4/g;
$pod_url =~ s/Õ/\% d5/g;
$pod_url =~ s/Ö/\% d6/g;
$pod_url =~ s/×/\% d7/g;
$pod_url =~ s/Ø/\% d8/g;
$pod_url =~ s/Ù/\% d9/g;
$pod_url =~ s/Ú/\% da/g;
$pod_url =~ s/Û/\% db/g;
$pod_url =~ s/Ü/\% dc/g;
$pod_url =~ s/�/\% dd/g;
$pod_url =~ s/Þ/\% de/g;
$pod_url =~ s/ß/\% df/g;

# lowercase
$pod_url =~ s/Ã /\% e0/g; # that's not a space but character 160
$pod_url =~ s/á/\% e1/g;
$pod_url =~ s/â/\% e2/g;
$pod_url =~ s/ã/\% e3/g;
$pod_url =~ s/ä/\% e4/g;
$pod_url =~ s/Ã¥/\% e5/g;
$pod_url =~ s/æ/\% e6/g;
$pod_url =~ s/ç/\% e7/g;
$pod_url =~ s/è/\% e8/g;
$pod_url =~ s/é/\% e9/g;
$pod_url =~ s/ê/\% ea/g;
$pod_url =~ s/ë/\% eb/g;
$pod_url =~ s/ì/\% ec/g;
$pod_url =~ s/Ã*/\% ed/g; # hidden character 173 in this line
$pod_url =~ s/î/\% ee/g;
$pod_url =~ s/ï/\% ef/g;
$pod_url =~ s/ð/\% f0/g;
$pod_url =~ s/ñ/\% f1/g;
$pod_url =~ s/ò/\% f2/g;
$pod_url =~ s/ó/\% f3/g;
$pod_url =~ s/ô/\% f4/g;
$pod_url =~ s/õ/\% f5/g;
$pod_url =~ s/ö/\% f6/g;
$pod_url =~ s/÷/\% f7/g;
$pod_url =~ s/ø/\% f8/g;
$pod_url =~ s/ù/\% f9/g;
$pod_url =~ s/ú/\% fa/g;
$pod_url =~ s/û/\% fb/g;
$pod_url =~ s/ü/\% fc/g;
$pod_url =~ s/ý/\% fd/g;
$pod_url =~ s/þ/\% fe/g;
$pod_url =~ s/ÿ/\% ff/g;

# some oddities:
$pod_url =~ s/Å /\% 8a/g; # Š
$pod_url =~ s/Å’/\% 8c/g; # Œ
$pod_url =~ s/Å¡/\% 9a/g; # š
$pod_url =~ s/Å“/\% 9c/g; # œ
$pod_url =~ s/Ÿ/\% 9f/g; # Ÿ

Note that I couldn't get this to appear correctly in this forum. % c0 should have no space between the % and the c0, and similarly for all the character entities.

All the foreign characters in directory categories work now, but not searches with international characters.

The code is not very economical, I know!