The following change will solve the problem for Jinja2 -

➜  roundup  hg diff
diff -r 8aa3175fb6ae roundup/cgi/templating.py
--- a/roundup/cgi/templating.py Sat May 11 21:22:39 2013 +0530
+++ b/roundup/cgi/templating.py Sat May 11 21:31:51 2013 +0530
@@ -1398,7 +1398,7 @@
             if not escape:
                 s = cgi.escape(s)
             s = self.hyper_re.sub(self._hyper_repl, s)
-        return s
+        return unicode(s, 'utf-8')

     def wrapped(self, escape=1, hyperlink=1):
         """Render a "wrapped" representation of the property.
➜  roundup

However, this doesn't work with the other engines.

In other words, I don't know if we are specifying an encoding explicitly 
but are just using str() in cgi/templating.py (def plain).  I am going 
to look around some more to see how to fix the problem.