Kevin Reid encountered this same problem. Here is the stack trace that he got:

/Applications/allmydata-tahoe-1.6.1/support/lib/python2.5/site-packages/zope.interface-3.5.2-py2.5-macosx-10.5-i386.egg/zope/__init__.py:3: UserWarning: Module twisted was already imported from /Applications/allmydata-tahoe-1.6.1/support/lib/python2.5/site-packages/Twisted-8.2.0-py2.5-macosx-10.5-i386.egg/twisted/__init__.pyc, but /Applications/allmydata-tahoe-1.6.1/support/lib/python2.5/site-packages/Nevow-0.9.33_r17222-py2.5.egg is being added to sys.path
  import pkg_resources
Traceback (most recent call last):
  File "/Applications/allmydata-tahoe-1.6.1/Twisted-8.2.0-py2.5-macosx-10.5-i386.egg/twisted/application/app.py", line 694, in run
    runApp(config)
  File "/Applications/allmydata-tahoe-1.6.1/Twisted-8.2.0-py2.5-macosx-10.5-i386.egg/twisted/scripts/twistd.py", line 23, in runApp
    _SomeApplicationRunner(config).run()
  File "/Applications/allmydata-tahoe-1.6.1/Twisted-8.2.0-py2.5-macosx-10.5-i386.egg/twisted/application/app.py", line 411, in run
    self.application = self.createOrGetApplication()
  File "/Applications/allmydata-tahoe-1.6.1/Twisted-8.2.0-py2.5-macosx-10.5-i386.egg/twisted/application/app.py", line 494, in createOrGetApplication
    application = getApplication(self.config, passphrase)
--- <exception caught here> ---
  File "/Applications/allmydata-tahoe-1.6.1/Twisted-8.2.0-py2.5-macosx-10.5-i386.egg/twisted/application/app.py", line 505, in getApplication
    application = service.loadApplication(filename, style, passphrase)
  File "/Applications/allmydata-tahoe-1.6.1/Twisted-8.2.0-py2.5-macosx-10.5-i386.egg/twisted/application/service.py", line 390, in loadApplication
    application = sob.loadValueFromFile(filename, 'application', passphrase)
  File "/Applications/allmydata-tahoe-1.6.1/Twisted-8.2.0-py2.5-macosx-10.5-i386.egg/twisted/persisted/sob.py", line 214, in loadValueFromFile
    exec fileObj in d, d
  File "tahoe-client.tac", line 10, in <module>
    c = client.Client()
  File "/Applications/allmydata-tahoe-1.6.1/src/allmydata/client.py", line 122, in __init__
    node.Node.__init__(self, basedir)
  File "/Applications/allmydata-tahoe-1.6.1/src/allmydata/node.py", line 68, in __init__
    self.create_tub()
  File "/Applications/allmydata-tahoe-1.6.1/src/allmydata/node.py", line 142, in create_tub
    self.tub = Tub(certFile=certfile)
  File "/Applications/allmydata-tahoe-1.6.1/support/lib/python2.5/site-packages/foolscap-0.4.2-py2.5.egg/foolscap/pb.py", line 225, in __init__
    self.setupEncryptionFile(certFile)
  File "/Applications/allmydata-tahoe-1.6.1/support/lib/python2.5/site-packages/foolscap-0.4.2-py2.5.egg/foolscap/pb.py", line 237, in setupEncryptionFile
    self.setupEncryption(certData)
  File "/Applications/allmydata-tahoe-1.6.1/support/lib/python2.5/site-packages/foolscap-0.4.2-py2.5.egg/foolscap/pb.py", line 252, in setupEncryption
    cert = self.createCertificate()
  File "/Applications/allmydata-tahoe-1.6.1/support/lib/python2.5/site-packages/foolscap-0.4.2-py2.5.egg/foolscap/pb.py", line 452, in createCertificate
    132)
  File "/Applications/allmydata-tahoe-1.6.1/Twisted-8.2.0-py2.5-macosx-10.5-i386.egg/twisted/internet/_sslverify.py", line 539, in signCertificateRequest
    hlreq = CertificateRequest.load(requestData, requestFormat)
  File "/Applications/allmydata-tahoe-1.6.1/Twisted-8.2.0-py2.5-macosx-10.5-i386.egg/twisted/internet/_sslverify.py", line 310, in load
    dn._copyFrom(req.get_subject())
  File "/Applications/allmydata-tahoe-1.6.1/Twisted-8.2.0-py2.5-macosx-10.5-i386.egg/twisted/internet/_sslverify.py", line 64, in _copyFrom
    value = getattr(x509name, name, None)
exceptions.UnicodeDecodeError: 'utf8' codec can't decode bytes in position 0-5: unsupported Unicode code range

Failed to load application: 'utf8' codec can't decode bytes in position 0-5: unsupported Unicode code range