Non-ASCII/extended characters can't be typed into applets. They are ignored.
On the Mac, the NPAPI delivers events to the plugin, which we then forward on to the applet process. If I turn on verbose mode, I can see that characters like option-u, then u are being delivered to the applet, but the applet isn't responding to the event.
To reproduce (and I'm sure there are easier ways to reproduce it):
1. load the Swing Set demo from http://java.sun.com/products/plugin/1.4/demos/jfc/SwingSet2/SwingSet2.html
2. You should see the 'Internal Frames Demo'. Click on the text field named 'Frame title:'.
3. Type option-u, then 'u'.
----> Expect to see umlauted U, but instead, nothing is typed.