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As discussed on python-ideas, swapping out the sys.std* streams can be fraught with peril. This can make writing code that wants to support an "--encoding" option for pipeline processing difficult.
The proposal [1] is that TextIOWrapper support a set_encoding() method that is only supported between creation of the stream and the first read or write operation. Once the stream is "dirty", you can no longer change the encoding - you must replace the stream (e.g. by passing stream.fileNo() to open())
[1] http://mail.python.org/pipermail/python-ideas/2012-June/015535.html