BUG #3638: UTF8 Character encoding does NOT work

The following bug has been logged online:

Bug reference: 3638
Logged by: Fil Matthews
Email address: fil(at)internetmediapro(dot)com
PostgreSQL version: 8-1 , 8-2
Operating system: Linux Debian - Windows XP
Description: UTF8 Character encoding does NOT work
Details:

Judging from the amount of Google page hits with the exact same problem I am
surprised and mystified by this obvious flaw in Postgres Technology..

Just how is one expected to work with UTF8 character sets when all and
every attempt at using even Postgres clients produces the SAME problem
every time ???

"invalid byte sequence for encoding "UTF8": 0x92"

In Short A Postgres UTF8 database .. PGCLIENENCODING=UTF8

Tables test.text -> (Chararcter varying 10)

In any Postgres Client ie psql , dbadmin III

Insert into test values ( chr(146));;

Query returned successfully: 1 rows affected, 32 ms execution time.

copy test to '/tmp/testfile.txt';

Query returned successfully: 1 rows affected, 15 ms execution time.

copy test from '/tmp/testfile.txt';

Come on are you serious?? .. Just how does one work with completly valid
data that has an ascii 128 + value ??

Currently this flaw make Postgres an un-useable database technology .. Or
can some-one please explain this and a possible work around .. ??

Thank You