bug#2940: 23.0.92; C-s in dired fails to find files with umlauts

With ~/töst.txt existing, when I do:

   $ emacs -Q ~/

and press:

   C-\ german-postfix RET C-s oe RET

to search for "ö" in the dired buffer (the input method correctly
converts the entered "oe" to "ö" in the minibuffer), I get:

   Failing wrapped I-search [DE<]: ö

C-u C-x = on the "ö" in the dired buffer yields:

             character: o (111, #o157, #x6f)
     preferred charset: ascii (ASCII (ISO646 IRV))
            code point: 0x6F
                syntax: w 	which means: word
              category: .:Base, a:ASCII, l:Latin, r:Roman
           buffer code: #x6F
             file code: #x6F (encoded by coding system utf-8-unix)
               display: composed to form "ö" (see below)

     Composed with the following character(s) "̈" using this font:
       xft:-unknown-Cochin-normal-normal-normal-*-20-*-*-*-*-0-iso10646-1
     by these glyphs:
       [0 1 111 82 11 1 10 8 0 nil]
       [0 1 776 235 6 0 6 12 -9 [-9 -1 0]]

     Character code properties: customize what to show
       name: LATIN SMALL LETTER O
       general-category: Ll (Letter, Lowercase)

     There are text properties here:
       dired-filename       t
       fontified            t
       help-echo            "mouse-2: visit this file in other window"
       mouse-face           highlight

C-u C-x = on the first "t" in "töst.txt" yields:

             character: t (116, #o164, #x74)
     preferred charset: ascii (ASCII (ISO646 IRV))
            code point: 0x74
                syntax: w 	which means: word
              category: .:Base, a:ASCII, l:Latin, r:Roman
           buffer code: #x74
             file code: #x74 (encoded by coding system utf-8-unix)
               display: by this font (glyph code)
         xft:-bitstream-Bitstream Vera Sans Mono-normal-normal-normal-*-20-*-*-*-m-0-iso10646-1 (#x57)

     Character code properties: customize what to show
       name: LATIN SMALL LETTER T
       general-category: Ll (Letter, Lowercase)

     There are text properties here:
       dired-filename       t
       fontified            t
       help-echo            "mouse-2: visit this file in other window"
       mouse-face           highlight


In GNU Emacs 23.0.92.3 (i386-apple-darwin9.6.1, GTK+ Version 2.14.7)
 of 2009-04-09 on mt-imac.local
Windowing system distributor `The X.Org Foundation', version 11.0.10402000
configured using `configure  '--with-tiff=no''

Important settings:
  value of $LC_ALL: nil
  value of $LC_COLLATE: nil
  value of $LC_CTYPE: nil
  value of $LC_MESSAGES: nil
  value of $LC_MONETARY: nil
  value of $LC_NUMERIC: nil
  value of $LC_TIME: nil
  value of $LANG: en.UTF-8
  value of $XMODIFIERS: nil
  locale-coding-system: utf-8-unix
  default-enable-multibyte-characters: t