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Huh, those crashes are interesting - I'd guess that it means we have a platform-dependent dependency from Py_DecodeLocale on to Py_SetPythonHome in order to locate the encodings module. If I'm right, that dependency would then mean that embedding applications can only rely on Py_DecodeLocale to do "char *" to "wchar_t *" conversions if they can also rely on the locale encoding always being a builtin one that bypasses the search for the encodings module.
Perhaps we should be recommending temporarily doing 'setenv("PYTHONHOME", home)' (and then reverting that after calling Py_Initialize so it doesn't get inherited by subprocesses) as the preferred approach to handling platforms with "char *" based native filesystem APIs, and adding such a setting to that particular `_testembed` test?