I have the same problem: I can't get the branch if the user's folder name is in Russian (Windows 7 Home Edititon, Russian):

bzr branch ftp://server/shared-repo/branch1

bzr: ERROR: exceptions.UnicodeDecodeError: 'ascii' codec can't decode byte 0xe4
in position 4: ordinal not in range(128)

Traceback (most recent call last):
 File "bzrlib\commands.pyo", line 911, in exception_to_return_code
 File "bzrlib\commands.pyo", line 1111, in run_bzr
 File "bzrlib\commands.pyo", line 689, in run_argv_aliases
 File "bzrlib\commands.pyo", line 704, in run
 File "bzrlib\cleanup.pyo", line 135, in run_simple
 File "bzrlib\cleanup.pyo", line 165, in _do_with_cleanups
 File "bzrlib\builtins.pyo", line 1209, in run
 File "bzrlib\bzrdir.pyo", line 1032, in open_tree_or_branch
 File "bzrlib\bzrdir.pyo", line 911, in open
 File "bzrlib\bzrdir.pyo", line 941, in open_from_transport
 File "bzrlib\lazy_import.pyo", line 125, in __call__
 File "bzrlib\transport\__init__.pyo", line 1657, in do_catching_redirections
 File "bzrlib\bzrdir.pyo", line 928, in find_format
 File "bzrlib\bzrdir.pyo", line 1949, in find_format
 File "bzrlib\bzrdir.pyo", line 1959, in probe_transport
 File "bzrlib\transport\__init__.pyo", line 610, in get_bytes
 File "bzrlib\transport\ftp\__init__.pyo", line 248, in get
 File "bzrlib\transport\ftp\__init__.pyo", line 108, in _get_FTP
 File "bzrlib\transport\ftp\__init__.pyo", line 141, in _create_connection
 File "bzrlib\transport\ftp\__init__.pyo", line 158, in _login
 File "bzrlib\config.pyo", line 1236, in get_password
 File "bzrlib\ui\text.pyo", line 128, in get_password
 File "bzrlib\ui\text.pyo", line 204, in prompt
 File "encodings\cp866.pyo", line 12, in encode
UnicodeDecodeError: 'ascii' codec can't decode byte 0xe4 in position 4: ordinal
not in range(128)

bzr 2.2.0 on python 2.6.4 (Windows-post2008Server-6.1.7600)
arguments: ['bzr', 'branch', 'ftp://silver/vbk-repo/trunk']
encoding: 'cp1251', fsenc: 'mbcs', lang: None
plugins:
 bzrtools             C:\Program Files (x86)\Bazaar\plugins\bzrtools [2.2.0]
 colo                 C:\Program Files (x86)\Bazaar\plugins\colo [0.1.0]
 explorer             C:\Program Files (x86)\Bazaar\plugins\explorer [1.1b1]
 fastimport           C:\Program Files (x86)\Bazaar\plugins\fastimport [0.9.0de
v]
 launchpad            C:\Program Files (x86)\Bazaar\plugins\launchpad [2.2.0]
 loom                 C:\Program Files (x86)\Bazaar\plugins\loom [2.2.1dev]
 netrc_credential_store C:\Program Files (x86)\Bazaar\plugins\netrc_credential_
store [2.2.0]
 news_merge           C:\Program Files (x86)\Bazaar\plugins\news_merge [2.2.0]
 pipeline             C:\Program Files (x86)\Bazaar\plugins\pipeline [unknown]
 qbzr                 C:\Program Files (x86)\Bazaar\plugins\qbzr [0.19.0]
 rewrite              C:\Program Files (x86)\Bazaar\plugins\rewrite [0.6.0]
 svn                  C:\Program Files (x86)\Bazaar\plugins\svn [1.0.3]
 upload               C:\Program Files (x86)\Bazaar\plugins\upload [1.0.0dev]
 xmloutput            C:\Program Files (x86)\Bazaar\plugins\xmloutput [0.8.6]

*** Bazaar has encountered an internal error.  This probably indicates a
   bug in Bazaar.  You can help us fix it by filing a bug report at
       https://bugs.launchpad.net/bzr/+filebug
   including this traceback and a description of the problem.