How about the following patch instead?  Does it solve the problem?
I'd also like Bruno's opinion on this of course.

--- a/lib/localcharset.c
+++ b/lib/localcharset.c
@@ -542,5 +542,12 @@ locale_charset (void)
   if (codeset[0] == '\0')
     codeset = "ASCII";
 
+#ifdef DARWIN7
+  /* MacOS X sets MB_CUR_MAX to 1 when LC_ALL=C, and "UTF-8"
+     (the default codeset) does not work when MB_CUR_MAX is 1.  */
+  if (strcmp (codeset, "UTF-8") == 0 && MB_CUR_MAX <= 1)
+    codeset = "ASCII";
+#endif
+
   return codeset;
 }


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