Another confusing data point.  If I say "make" in the test directory, I
get:

foo 1: "\"/home/larsi/src/emacs/f\\363o/test/lisp/eshell/eshell-tests.elc\""
foo 2: "#(\"/home/larsi/src/emacs/fóo/test/lisp/eshell/eshell-tests.elcGvbK3T\" 0 65 (charset iso-8859-1))"

If I just say "make" in the main directory, I get this:

foo 1: "\"/home/larsi/src/emacs/f�o/lisp/dos-w32.elc\""
foo 2: "\"/home/larsi/src/emacs/fóo/lisp/dos-w32.elcXgukAl\""

Or, if that doesn't survive emailing, here's an umage: