After making the move to UTF-8 for all applications in my daily routine a couple of weeks ago, putty was the last client to cause any sort of problem. I logged into my home server to read E-mail today, and putty apparently got everything mixed up as it tried parsing the UTF-8 encoded text as ISO-8859-1.
There is however a quick and easy solution in the more recent versions of putty (.. only a couple of years old?):
Menu -> Change Settings -> Window -> Translation -> Received data assumbed to be in character set
Set that value to UTF-8, and everything will be A-OK!