Version:           unknown (using KDE 3.1.4)
Installed from:     (testing/unstable)
Compiler:          gcc version 3.3.2 20030908 (Debian prerelease)
OS:          Linux (i686) release 2.4.22-1-k7

I made a web shortcut with the following (the standard "gg:" one doesn't work as well, but to be strict):

name:Google
URI:http://www.google.com/search?num=100&hl=en&lr=&ie=UTF-8&oe=UTF-8&q=\{@}&btnG=Google+Search
shortcut:gg,google

I enter "gg:prüfer code" in konquoror location bar and it displays a location for me. But the german umlaut doesn't display correctly. If I manually change the cgi parameter "ie" (what I suppose is input encoding) for iso-8859-1 it displays correctly, so I suppose the konqueror encodes it wrong. Also manual input in the google window attaches other values to umlaut in cgi to display correctly in UTF-8. The google is rather innocent, because there is no umlaut in ascii, so this should be double/multi char and, so it is when entered manually, but its only one %XX combination when "gg:" is used.

By the way, field, where You choose the "utf-8" value has name "charset" and AFAIK utf-8 is an encoding.