in reply to
Convert international characters to plain ASCII
Dropbox most certainly does handle "international characters" in filenames - I've had things there with Russian filenames, for example. Not sure what encoding it was though. This was on OS X, so probably UTF-8.
Your filenames getting garbled is probably because you're expecting different encodings in different places. In my case because I *only* used OS X and iOS, it was the same encoding everywhere.
As for the case-insensitivity - this is probably deliberate so as not to terminally confuse clients using Windows or using case-insensitive versions of HFS+.