In order to have the playlists processed correctly you have to save them in UTF-8 format:
Notepad : File->Save As->Change coding from ANSI to UTF-8
EMACS : Options->Mule->Set Codings Systems->
For Saving This Buffer->utf-8
Note that the playlist entrys with special characters won’t be recognised by Winamp any more unless you rename it to *.m3u8. (But then Firefly won’t find it. I once tried to patch the source for that, but I did not succeed due to my lack of C programming skills.)