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Python3 is unable to start (bootstrap failure) on a POSIX system if the locale encoding is different than utf8 and the Python path (standard library path where the encoding module is stored) contains a non-ASCII character. (Windows and Mac OS X are not affected by this issue because the file system encoding is hardcoded.)
 - Py_FileSystemDefaultEncoding == NULL
 - calculate_path(): sys.path is filled with directory names decoded with the locale encoding
 - find_module() encodes each path using PyUnicode_AsEncodedString(..., Py_FileSystemDefaultEncoding, NULL): use "utf-8" encoding because Py_FileSystemDefaultEncoding is NULL
=> error because the path is not encoded and decoded with the same encoding
We cannot encodes a path with the locale encoding because we need find_module() to load the encoding codec, and loading the codec needs find_module()... (bootstrap error :-))
We should decodes the path using a fixed encoding (eg. ASCII or utf-8), use the same encoding to encodes paths in find_module(), and then reencode paths of all objects storing filenames:
 - sys.path list items
 - sys.modules dict keys
 - sys.modules values: each module have __file__ and/or __path__ attributes
 - all code objects (co_filename)
 - (maybe some other?)
The error occurs in an early stage of Py_InitializeEx(), so the object list is limited and we control this list (eg. site is not loaded yet).
Related issues:
 - #8610: "Python3/POSIX: errors if file system encoding is None"
 - #8242: "Improve support of PEP 383 (surrogates) in Python3: meta-issue"

We could have a separate list storing the original bytes form of sys.path; this list would be used by find_module() as long as Py_FileSystemDefaultEncoding isn't initialized.

Or find_module() could use wcstombs() as long as Py_FileSystemDefaultEncoding is NULL.

I have a patch implementation most of the point described in my first message. I have to rework on it before submit it. The patch depends on other issues, and I prefer to first fix all related issues.

Let's try with something: pyunicode_asencodefsdefault.patch adds PyUnicode_EncodeFSDefault() function to uniformize how a unicode is converted to bytes. Fallback to UTF-8 if Py_FileSystemEncoding is not set (I should be ASCII, not UTF-8) and use surrogateescape error handler.

I opened a separated issue for the new function PyUnicode_EncodeFSDefault(): #8715.

See also #4352.

If I understood correctly, this issue is a regression introduced by r67055 (to fix #4213). Read: http://bugs.python.org/issue4213#msg75387
See also r67057 (issue #3723).

After looking in #4352 deep I figured out what true separation of filesystem default encoding and utf8 python namespace is really too complicated.
For example import call stack chain converts module name from utf-8 to filesystem in import.c:find_module. After that converted name used by PyImport_ExecCodeModule* as utf-8 name while actually it has filesystem encoding. That problem cannot be solved by "five-line patch" and Martin von Loevis suggested me to stop potentially dangerous big import.c changes in python 3.1 beta. 
I like importlib way (with maybe C implementation as next step) in terms of "true way" reorganization of python import machinery, but unfortunatelly Cannon has no time for that. From my perspective only big refactoring can solve encoding issues (and we can use excellent io implementation to open utf-8 named files in Windows using native unicode functions). We need to split 'module names' from 'filesystem pathes' clean. 
Maybe pure python importing is not easy - not sure. But reorganizing of current 'import spaghetti' is required. importlib (and PEP 302) introduced a nice way to do that.
I like to be volunteer for this task and I feel enough knowledge to implement and test cover at least windows and linux (MacOs is not big problem also). But I need a mentor (Petrou, Cannon - you are welcome) to make it done, done clear and stable, done in resonable time period.

As I wrote, I have an huge patch somewhere in my harddrive fixing this issue. But I don't want to publish it because it's really huge. I prefer to fix the problem step by step. I fixed most related issues: see the dependency list of #8242. I will publish the big patch shortly.

I'm skeptical about surrogates particularly for that problem.
From my perspective the solution is only to use native unicode support for windows file operation functions.
Conversions utf-8 -> mbcs -> utf8 will loose encoding information thanks to tricky Microsoft mbcs encoding schema.
If I'm wrong please correct me.

asvetlov> I'm skeptical about surrogates particularly for that 
asvetlov> problem. From my perspective the solution is only to use 
asvetlov> native unicode support for windows file operation functions.
It's not exclusive. We can use surrogates on POSIX and then convert to bytes at the system calls, and use the unicode version of the Windows API. In both cases, filenames are unicode.
asvetlov> Conversions utf-8 -> mbcs -> utf8 will loose encoding
asvetlov> information thanks to tricky Microsoft mbcs encoding schema.
asvetlov> If I'm wrong please correct me.
On Windows, Python3 *does* convert unicode to bytes with the mbcs encoding in the import machinery. I tested and Python3 has the same problem on Windows with non decodable filenames than Python3 on Unix. Eg. add "\u0809" character (random non encodable character) to the Python directory name: Python3 doesn't start if the code page cannot encode/decode it.
To fix all OS (Windows and POSIX), Python3 import machinery should not convert filenames to bytes but manipulate unicode characters and only convert filenames to bytes on POSIX at the last moment (at system calls).
--
mbcs codec ignores the error handler: it replaces unknown characters by "?" by default, see #850997.

I think that #8988 is a duplicate of this issue.

See also #3080.

I posted a patch to fix this issue: see #9425.

This will have to wait until after alpha1, as well.

The Unicode import system won't be put in place before 3.2a2, deferring.

See also #9713 (Py_CompileString fails on non decode-able paths) and #9738 (Document the encoding of functions bytes arguments of the C API).

Deferring once again.

Status of this issue, 5 months later: most tests pass except test_gc test_gdb test_runpy test_sys test_wsgiref test_zipimport. Said differently, 95% of the task (or more?) is done. It's possible to run Python installed in a non-ascii directory with any locale (I tested ascii, iso-8859-1 and utf-8).

Updated list of failing test with py3k and a non-ascii path:
 * Linux, LANG=C: test_gc test_gdb test_runpy test_zipimport
 * Windows: test_email test_httpservers test_zipimport
Possible reasons:
 * test_httpservers (CGIHTTPServerTestCase.setUp): test should be skipped if sys.executable is not pure ASCII (and it's not possible to create ASCII path using a symlink)
 * test_zipimport: zipimport uses utf-8 (in strict mode) for the prefix, instead of the filesystem encoding
 * test_gc (test_get_count): "The following two tests are fragile: ..." :-/
 * test_gdb: libpython doesn't support surrogates if paths
 * test_email: issue with the end of line (\n vs \r\n?)
 * test_runpy: ?

r85655 fixed test_gdb failure.
test_runpy failure looks to be linked to test_zipimport problems.

r85659 + r85662 + r85663 fixed test_httpservers.

Victor, can you paste or attach the error for email? My MSDN subscription has expired so I can't set up to test it myself (I've submitted the renewal, but who knows how long it will take to process :)

> Victor, can you paste or attach the error for email?
It doesn't look to be related to the path name (same failure with "py3ké" or "py3k" directory name), so I opened #10134.

Starting at r85691, the full test suite of Python 3.2 pass with ASCII, ISO-8859-1 and UTF-8 locale encodings in a non-ascii directory. The work on this issue is done.