Since I upgraded to 4.6, filenames with unicode characters are no longer displaying correctly in KDE applications. For example, a filename containing "ü" (U+00FC, UTF-8 encoding 0xC3 0xBC) now contains "ü" in its place. The unicode code points for these characters are U+00C3 and U+00BC. If I create a new file in dolphin or Konsole, all characters display correctly in Dolphin, but as question marks in Konsole. Old files appear correctly in Nautilus or tty, but new files created in Dolphin appear as "dolphin_� (invalid encoding)" for the file "dolphin_ü" in Nautilus.

It seems that KDE before 4.6, and all non KDE applications are using UTF-8, but KDE is using a different encoding as of 4.6. Is there any way to change it back so it works correctly?

I have similar problem too. Try execute in konsole "locale". If output will be contain like this:
"Cannot set LC_CTYPE to default locale: No such file or directory"
Then try to redefine system locales.
In my choice I googled this command "sudo localedef -i en_US -c -f UTF-8 en_US.UTF-8"

Please verify that all needed locale packages are installed, and that Qt and KDE packages are fully up to date.