Web.py is a lovely tool I'm currently using for a silly project (warning: explicit Italian language). Unfortunately, it does some clever things to support URLs containing Unicode, but then drops the ball when it comes to actually do anything with them (i.e. dispatch/route them as expected, using regular expressions that actually match Unicode objects).
This was a real problem in my app, so I came up with a quick and dirty patch, which may or may not work for you and may or may not break other things. Basically I've tracked down the regex operations on URLs, and added Python's re.UNICODE flag to them, so that unicode characters will be matched as "\w" etc.
Feel free to tell me where I'm going wrong -- I'm not a web.py guru by all means -- but this little patch significantly improved my quality of life today, so to speak.