IDN SUPPORT
If dig has been built with IDN (internationalized domain name) support, it can accept and
display non-ASCII domain names. dig appropriately converts character encoding of domain name
before sending a request to DNS server or displaying a reply from the server. If you'd like to
turn off the IDN support for some reason, defines the IDN_DISABLE environment variable. The IDN
support is disabled if the variable is set when dig runs.
There must be support for idn domain names, but perhaps you forgot to enable it?
!ping :) - dnsutils 1:9.7.3. dfsg-1ubuntu4. 1
From the man page in ubuntu 11.10 oneiric:
IDN SUPPORT
If dig has been built with IDN (internationalized domain name) support, it can accept and
display non-ASCII domain names. dig appropriately converts character encoding of domain name
before sending a request to DNS server or displaying a reply from the server. If you'd like to
turn off the IDN support for some reason, defines the IDN_DISABLE environment variable. The IDN
support is disabled if the variable is set when dig runs.
There must be support for idn domain names, but perhaps you forgot to enable it?