AFAICS a keyfile is by definition UTF-8 encoded; anything else would be madness since it can contain translations, and cf. the desktop spec.

Anyhow - I've been getting non-UTF8 strings coming out of it; and with this patch:

--- glib-2.18.2/glib/gkeyfile.c.old
+++ glib-2.18.2/glib/gkeyfile.c
@@ -1795,7 +1795,7 @@
 
               if (has_gettext)
                 {
-                  if (bind_textdomain_codeset (key_file->gettext_domain, NULL))
+                  if (bind_textdomain_codeset (key_file->gettext_domain, "UTF-8"))
                     translated_value = g_strdup (translated);
                   else
                     translated_value = g_locale_to_utf8 (translated,

I don't any more. To reproduce:

export LANG=de_DE  # nb. no .UTF-8

and then get a string from a keyfile translated using the default gettext domain (eg.).

HTH.