Umlaut characters (and others) display strangely in Terminal.app

Terminal.app behaves a bit strange - lately...

1. äöüÄÖÜ etc. are not displayed correctly
2. deleteing one character of the above deletes two in the terminal (i.e. hitting the keyboard once and deleting this last character moves the cursor to position -1)

some help for 1. may be found on:

GNU development under Mac OS X - TECH.inhelsinki.nl,
http://www.macosxhints.com/article.php?story=20060825071728278 and
http://groups.google.com/group/

for 2. one might have to change the Character Set Encoding for the Terminal.app (Terminal/Window Settings...) to something other than UTF-8