I don't like mixed case urls from an aesthetic point of view, but I don't see why it would do any harm as an option to util_text_to_url.
Regarding url-encoding unicode characters - I'm not sure if that is a good idea, wouldn't that mean we get ugly urls like /foo/h%63%81lich/, whereas the current hack for german characters would make that a /foo/haesslich/ ? I think that would defeat the purpose of util_text_to_url.