yet another terminal/iterm umlaut irritation

Hi all

I'm back again with umlaut issues.

However I'll begin by describing the set up.

I have GNU bash, version 3.2.17(1)-release (powerpc-apple-darwin8.9.0) installed.
I also use vim version 7.1b.1 BETA

My .bashrc contains the following

PATH=$PATH:/usr/local/bin/:/Users/duffy/'Java Arkiv'/Glassfish_Arkiv/glassfish/bin/
export LC ALL=svSE.UTF-8
export LANG=sv_SE.UTF-8
export JAVA_HOME=/Library/Java/Home
export TERM=xterm-16color
alias mysql=/usr/local/mysql/bin/mysql
alias vim=/opt/local/bin/vim
alias vimdiff=/opt/local/bin/vimdiff
SHELL=/opt/local/bin/bash

my .bash_profile contains

if [ -f ~/.bashrc ]; then
source ~/.bashrc
fi

my .inputrc contains

set input-meta on
set output-meta on

set convert-meta off
set meta-flag on

My terminal settings are as follows
I login with usr/bin/login
use xterm-color
screensettings -> utf-8 encoding, wide characters count as 2

And in my .vimrc I have set the encoding to utf-8

That about does it for my set up.

Now - here goes.
Terminal command window displays umlauts correctly, and appears to display umlauts correctly when typing. If I do a ls on a directory and see a file called lets påsk.txt the file name looks fine. If i type ls på* I get No such file or directory, however if I mark the file name and do a cut and paste in terminal, i.e I cut and paset "på" and paste it into ls then I get ls på* and it works fine. In other words the keyboard input and terminal output display doesnt seem to be the same. I cant figure out why this is. On top of that, when I start vim I can type å ä ö but everytime I do it uses two spaces, so the word påsk looks like this på sk, thsi despite the fact that the terminal uses utf-8 and vim encoding is set to utf-8.

Maybe I've missed some info here, but I've pretty much put all the info in here I think is relevant.

I await words fron the grea Guru out there. 🙂