Trouble with .inputrc (part of readline)

[Harry Putnam <reader@newsguy.com>]

Running (recently upgraded from wheezy) 'Testing'.

I see something happen when using ~/.inputrc that I don't now how to
track down.

In console (noX) mode the things I have in ~/.inputrc work as
expected. 

And example might be 

   set keymap emacs-meta
   f: "find  -iname '* *'"

So pressing Atl+f inserts `find  -iname '* *'' onto the command line
so I can just fill in the directory and filename.

OK, works just like I planned.

But in X using xterm (XTerm(295)), pressing Alt+f inserts a character
I don't recognize... I hope I can reproduce it here by copy/paste:

   `æ'

Pressing Alt+V inserts `Ö'

All the little helpful things I've set to insert produce equally
unfamiliar characters instead of the command line I want.

Is this a LANG setting... or any ideas what is going here?

"echo $LANG" shows: 
  en_US.UTF-8