annotate - ascii codec can't decode byte

It seems that 'annotate' has problems with utf-8 characters. Files with no special characters works fine, but when a file includes special charaters 'annotate' fails:

[od@padden test]$ bzr annotate --xml TODO\ Årupvænget.txt
bzr: ERROR: exceptions.UnicodeDecodeError: 'ascii' codec can't decode byte 0xc3 in position 86: ordinal not in range(128)

Traceback (most recent call last):
  File "/usr/lib/python2.5/site-packages/bzrlib/commands.py", line 846, in run_bzr_catch_errors
    return run_bzr(argv)
  File "/usr/lib/python2.5/site-packages/bzrlib/commands.py", line 797, in run_bzr
    ret = run(*run_argv)
  File "/usr/lib/python2.5/site-packages/bzrlib/commands.py", line 499, in run_argv_aliases
    return self.run(**all_cmd_args)
  File "/usr/lib/python2.5/site-packages/bzrlib/commands.py", line 807, in ignore_pipe
    result = func(*args, **kwargs)
  File "/usr/lib/python2.5/site-packages/bzrlib/plugins/xmloutput/__init__.py", line 129, in run
    wt_root_path=wt_root_path, file_path=relpath)
  File "/usr/lib/python2.5/site-packages/bzrlib/plugins/xmloutput/annotatexml.py", line 65, in annotate_file_xml
    to_file.write('<entry %s>%s</entry>' % (anno, _escape_cdata(text)))
  File "/usr/lib/python2.5/codecs.py", line 303, in write
    data, consumed = self.encode(object, self.errors)
UnicodeDecodeError: 'ascii' codec can't decode byte 0xc3 in position 86: ordinal not in range(128)

bzr 1.5 on python 2.5.1 (linux2)
arguments: ['/usr/bin/bzr', 'annotate', '--xml', 'TODO \xc3\x85rupv\xc3\xa6nget.txt']
encoding: 'UTF-8', fsenc: 'UTF-8', lang: 'en_US.UTF-8'
plugins:
  bzrtools /usr/lib/python2.5/site-packages/bzrlib/plugins/bzrtools [1.5.0]
  gtk /usr/lib/python2.5/site-packages/bzrlib/plugins/gtk [0.94.0]
  launchpad /usr/lib/python2.5/site-packages/bzrlib/plugins/launchpad [unknown]
  xmloutput /usr/lib/python2.5/site-packages/bzrlib/plugins/xmloutput [0.4.4]
*** Bazaar has encountered an internal error.
    Please report a bug at https://bugs.launchpad.net/bzr/+filebug
    including this traceback, and a description of what you
    were doing when the error occurred.
<?xml version="1.0"?><annotation workingtree-root="/home/od/src/test/" file="TODO Årupvænget.txt"><entry revno="1" author="od@padden" date="20080531"></entry><entry revno="6" author="od@padden" date="20080612">Line without special charaters</entry><entry revno="6" <email address hidden>" date="20080612">Another line without special charaters</entry>[od@padden test]$