Version:            (using KDE 4.0.1)
Installed from:    Ubuntu Packages
OS:                Linux

Copying information provided in Ubuntu Launchpad (#192652)
https://launchpad.net/bugs/192652

I was able to confirm this on both my Kubuntu packages and my trunk checkout.

-----------------------------------------------------------
Binary package hint: konqueror-kde4
DISTRIB_ID=Ubuntu
 DISTRIB_RELEASE=8.04
 DISTRIB_CODENAME=hardy
 DISTRIB_DESCRIPTION="Ubuntu hardy (development branch)"
Desired=Unknown/Install/Remove/Purge/Hold
 | Status=Not/Installed/Config-f/Unpacked/Failed-cfg/Half-inst/t-aWait/T-pend
 |/ Err?=(none)/Hold/Reinst-required/X=both-problems (Status,Err: uppercase=bad)
 ||/ Name Version Beschreibung
 +++-================================================-===================================-==============================================================
 ii konqueror-kde4 4:4.0.1-0ubuntu2 KDE 4's advanced file manager, web browser and document viewer
1) Enter a non-ASCII URL like <http://www.münster.de/> to see that IDN work.
 2) Enable Google as the default search engine (problem also occurs with Wikipedia as the search engine, for example).
 3) Enter a search term such as "Münster" into the address bar and hit enter.
 4) See that the Google page omits the "ü" umlaut because it seems to be encoded incorrectly.
Just entering "Münster" in the address bar when using Google as the default search engine opens <http://www.google.de/search?q=M%EF%BF%BDnster&ie=UTF-8&oe=UTF-8> in my case. If I enter "Münster" in Google's search form, <http://www.google.de/search?hl=de&q=M%C3%BCnster&btnG=Suche&meta=> is opened. Note how the umlaut is encoded differently