diff -u -r gnome-terminal.orig/src//profile-editor.c gnome-terminal/src//profile-editor.c
--- gnome-terminal.orig/src//profile-editor.c	Mon Dec 19 15:09:23 2005
+++ gnome-terminal/src//profile-editor.c	Mon Dec 19 15:26:25 2005
@@ -890,7 +890,7 @@
   gtk_file_chooser_add_filter (GTK_FILE_CHOOSER (filechooser), filter);
 
   image_preview = gtk_image_new ();
-  pixbuf = create_preview_pixbuf (terminal_profile_get_background_image_file (profile));
+  pixbuf = create_preview_pixbuf (g_filename_from_utf8(terminal_profile_get_background_image_file (profile), -1, NULL, NULL, NULL));
   if (pixbuf != NULL) {
     gtk_image_set_from_pixbuf (GTK_IMAGE (image_preview), pixbuf);
   }
@@ -1965,11 +1965,19 @@
                                         TerminalProfile *profile)
 {
   GtkWidget *w;
+  const char *utf8_filename;
+  char *sys_filename;
 
   w = profile_editor_get_widget (editor, "background-image-filechooser");
 
-  gtk_file_chooser_set_filename (GTK_FILE_CHOOSER (w),
-                                 terminal_profile_get_background_image_file (profile));
+  utf8_filename = terminal_profile_get_background_image_file (profile);
+  sys_filename = NULL;
+  if (utf8_filename != NULL)
+  	sys_filename = g_filename_from_utf8 (utf8_filename, -1, NULL, NULL, NULL);
+
+  gtk_file_chooser_set_filename (GTK_FILE_CHOOSER (w), sys_filename);
+  
+  g_free (sys_filename);
 }
 
 static void
diff -u -r gnome-terminal.orig/src//terminal-profile.c gnome-terminal/src//terminal-profile.c
--- gnome-terminal.orig/src//terminal-profile.c	Mon Dec 19 15:09:23 2005
+++ gnome-terminal/src//terminal-profile.c	Mon Dec 19 15:17:40 2005
@@ -1247,6 +1247,7 @@
                                             const char      *filename)
 {
   char *key;
+  char *utf8_filename = NULL;
 
   RETURN_IF_NOTIFYING (profile);
   
@@ -1253,11 +1254,15 @@
   key = gconf_concat_dir_and_key (profile->priv->profile_dir,
                                   KEY_BACKGROUND_IMAGE);
   
+  if (filename != NULL)
+  	utf8_filename = g_filename_to_utf8 (filename, -1, NULL, NULL, NULL);
+	
   gconf_client_set_string (profile->priv->conf,
                            key,
-                           filename,
+                           utf8_filename,
                            NULL);
 
+  g_free (utf8_filename);
   g_free (key);
 }
 
diff -u -r gnome-terminal.orig/src//terminal-widget-vte.c gnome-terminal/src//terminal-widget-vte.c
--- gnome-terminal.orig/src//terminal-widget-vte.c	Mon Dec 19 15:09:23 2005
+++ gnome-terminal/src//terminal-widget-vte.c	Mon Dec 19 15:20:34 2005
@@ -338,10 +338,15 @@
 terminal_widget_set_background_image_file (GtkWidget  *widget,
 					   const char *fname)
 {
+  char *sys_fname = NULL;
+  
   g_return_if_fail(VTE_IS_TERMINAL(widget));
 
-  if ((fname != NULL) && (strlen(fname) > 0))
-    vte_terminal_set_background_image_file(VTE_TERMINAL(widget), fname);
+  if ((fname != NULL) && (strlen(fname) > 0) && ((sys_fname = g_filename_from_utf8(fname, -1, NULL, NULL, NULL)) != NULL))
+  {
+    vte_terminal_set_background_image_file(VTE_TERMINAL(widget), sys_fname);
+    g_free (sys_fname);
+  }  
   else
     vte_terminal_set_background_image(VTE_TERMINAL(widget), NULL);
 }
