Well, I finally made it!
The confict was caused by system using ISO locale, while the db
thought it was unicode. The solution was to create the database WITH
ISO ENCODING and set the CLIENT_ENCODING variable to UNICODE.
The only thing left is to set PGCLIENTENCODING environment variable
to UNICODE and enjoy.
BTW: A question for Don - Is there a configuration parameter letting
you specify the client encoding for postgres (in the driver)?