Emacs and ISO-8859-1 characters

[André Dahlqvist <andre@beta.telenordia.se>]

I have a strange problem that I discovered while switching to using
emacs as an editor in Mutt. It turns out that emacs will not accept
non-ASCII characters like åäöé if I'm running emacs from within an
xterm, but it works fine on the console or as a stand alone X
application. To make things even stranger I can always display such
characters if I open a file containing them, even from inside an xterm.
I have tried executing 'set-language-environment' and setting it to
'Latin 1', but to no avail.  My LC_CTYPE variable is set to
sv_SE.ISO-8859-1, but it doesn't seam to matter if I change that.

Has anyone experienced anything like this?
--

// André