FULL PRODUCT VERSION :
1.5.0_05 and 1.6.0 53
ADDITIONAL OS VERSION INFORMATION :
Windows XP service pack2
A DESCRIPTION OF THE PROBLEM :
I have an applet, it works fine on IE,Firefox,Netscape with JRE 1.5. How ever, when i placed it in a double-byte character folder, it doesn't work anymore.
STEPS TO FOLLOW TO REPRODUCE THE PROBLEM :
1) Create a folder with the name - "c��"
2) Try to open the html file in IE / firefox. The below error is thrown
When accessing this from another folder this behavior is not seen.
EXPECTED VERSUS ACTUAL BEHAVIOR :
EXPECTED -
The applet is shown
ACTUAL -
The error is thrown 
ERROR MESSAGES/STACK TRACES THAT OCCUR :
Java Plug-in 1.5.0_05
Using JRE version 1.5.0_05 Java HotSpot(TM) Client VM
User home directory = D:\Documents and Settings\Administrator
----------------------------------------------------
c:   clear console window
f:   finalize objects on finalization queue
g:   garbage collect
h:   display this help message
l:   dump classloader list
m:   print memory usage
o:   trigger logging
p:   reload proxy configuration
q:   hide console
r:   reload policy configuration
s:   dump system and deployment properties
t:   dump thread list
v:   dump thread stack
x:   clear classloader cache
0-5: set trace level to <n>
----------------------------------------------------
Exception in thread "Thread-2" java.lang.IllegalArgumentException
	at sun.net.www.ParseUtil.decode(Unknown Source)
	at sun.net.www.protocol.file.Handler.openConnection(Unknown Source)
	at sun.net.www.protocol.file.Handler.openConnection(Unknown Source)
	at java.net.URL.openConnection(Unknown Source)
	at sun.applet.AppletPanel.getAccessControlContext(Unknown Source)
	at sun.applet.AppletPanel.getClassLoader(Unknown Source)
	at sun.applet.AppletPanel.createAppletThread(Unknown Source)
	at sun.applet.AppletPanel.init(Unknown Source)
	at sun.plugin.AppletViewer.createClassLoader(Unknown Source)
	at sun.plugin.AppletViewer.appletInit(Unknown Source)
	at sun.plugin.viewer.LifeCycleManager.initAppletPanel(Unknown Source)
	at sun.plugin.viewer.IExplorerPluginObject$Initer.run(Unknown Source)
REPRODUCIBILITY :
This bug can be reproduced always.
---------- BEGIN SOURCE ----------
HelloWorldApplet.java 
import java.applet.Applet;
import java.awt.Graphics;
public class HelloWorldApplet extends Applet {
    public void paint(Graphics g) {
        g.drawString("Hello world!", 50, 25);
    }
}
Test.html
<HTML>
<BODY>
<APPLET CODE="HelloWorldApplet.class" WIDTH="200" HEIGHT="200">
</APPLET>
</BODY>
</HTML>
---------- END SOURCE ----------