Embedding national keywords in links

$url + urlencode("café") =?

[Morgenhund]

I tried to search around for this topic, but nothing popped up.
Having URL on your site like www.blah-blah.com/keyword1/keyword2.html improves positions in SE by keywords1, keyword2, obviosly.

What if my keyword includes some UTF-8 national-specific symbols, like 'Latin small letter with caron' (html-entitiy č)?

Has somebody thied to include such words in URL's, for example, utf-8'ed and then urlencoded? Any encouraging results?