(In reply to comment #1)
It's everywhere including the console and ssh session of putty. The best "cure"
I have discovered is changing the corresponding line in
/etc/environment back to cs_CZ.ISO-8859-2 and installing the
Gnome continue using UTF-8 but the remote commandline is OK
(unless you created some files with UTF-8 names).
This fix would allow using Hoary as server at least, but since there is
a fatal error in Czech Hoary installer (#8801) and Sarge is out we can spare the
effort for the present.