I'm just start using your excellent terminal emulator - xfce Terminal. But there was no dynamic encoding changing support, so I've added it.
Please, look at this small patch - may be it have a chance to be included in release.

Available encoding list hardcoded in two arrays - radio_action_entries and radio_action_encoding_names, which sizes must be the same (of course, data may be wrapped in one structure, but it's not done for the simplicity).
Also, position of menu items may be changed simplify by modifying Terminal.ui and terminal-screen.c (correct path to Encoding menu).

I'm not guru in *nix-programming, so default encoding get from ENCODING env. var. Probably, it should be rewritten. 


--- terminal-screen.c.old	2007-02-02 17:28:08.000000000 +0300
+++ terminal-screen.c	2007-02-02 17:27:47.000000000 +0300
@@ -1523,3 +1523,16 @@
   return result;
 }
 
+/**
+ * terminal_screen_set_encoding
+ * @screen    : A #TerminalScreen.
+ * @encoding  : encoding to set
+ *
+ * Return value:
+ **/
+void
+terminal_screen_set_encoding (TerminalScreen *screen,
+                               const char    *encoding)
+{
+  g_return_if_fail (TERMINAL_IS_SCREEN (screen));
+  vte_terminal_set_encoding(VTE_TERMINAL (screen->terminal), encoding);
+}



--- terminal-screen.h.old	2007-02-02 17:28:09.000000000 +0300
+++ terminal-screen.h	2007-02-02 17:27:33.000000000 +0300
@@ -85,6 +85,9 @@
 
 GList     *terminal_screen_get_restart_command        (TerminalScreen *screen);
 
+void         terminal_screen_set_encoding             (TerminalScreen *screen,
+                                                       const char    *encoding);
+
 G_END_DECLS;
 
 #endif /* !__TERMINAL_SCREEN_H__ */


--- Terminal.ui.original	2007-02-02 17:31:19.000000000 +0300
+++ Terminal.ui	2007-02-02 12:43:59.000000000 +0300
@@ -41,6 +41,10 @@
       <menuitem action="reset"/>
       <menuitem action="reset-and-clear"/>
     </menu>
+    
+    <menu name="Encoding" action="encoding-menu">
+    </menu>
+
     <menu action="go-menu">
       <menuitem action="prev-tab"/>
       <menuitem action="next-tab"/>



--- terminal-window.c.original	2007-02-02 17:08:04.000000000 +0300
+++ terminal-window.c	2007-02-02 17:15:58.000000000 +0300
@@ -33,6 +33,12 @@
 #ifdef HAVE_TIME_H
 #include <time.h>
 #endif
+#ifdef HAVE_STDLIB_H
+#include <stdlib.h>
+#endif
+#ifdef HAVE_STRING_H
+#include <string.h>
+#endif
 #ifdef HAVE_UNISTD_H
 #include <unistd.h>
 #endif
@@ -169,7 +175,9 @@
 static void            terminal_window_action_about             (GtkAction       *action,
                                                                  TerminalWindow  *window);
 
-
+static void            terminal_window_action_set_encoding      (GtkRadioAction       *action,
+                                                                 GtkRadioAction       *current,
+                                                                 TerminalWindow  *window);
 
 struct _TerminalWindow
 {
@@ -181,6 +189,7 @@
   GtkWidget           *preferences_dialog;
 
   GtkActionGroup      *action_group;
+  GtkActionGroup      *encoding_action_group;
   GtkUIManager        *ui_manager;
   
   GtkWidget           *menubar;
@@ -226,6 +235,7 @@
   { "report-bug", TERMINAL_STOCK_REPORTBUG, N_ ("_Report a bug"), NULL, N_ ("Report a bug in Terminal"), G_CALLBACK (terminal_window_action_report_bug), },
   { "about", GTK_STOCK_ABOUT, N_ ("_About"), NULL, N_ ("Display information about Terminal"), G_CALLBACK (terminal_window_action_about), },
   { "input-methods", NULL, N_ ("_Input Methods"), NULL, NULL, NULL, },
+  { "encoding-menu", NULL, N_ ("_Encoding"), NULL, NULL, NULL, },
 };
 
 static const GtkToggleActionEntry toggle_action_entries[] =
@@ -236,7 +246,23 @@
   { "fullscreen", TERMINAL_STOCK_FULLSCREEN, N_ ("_Fullscreen"), NULL, N_ ("Toggle fullscreen mode"), G_CALLBACK (terminal_window_action_fullscreen), FALSE, },
 };
 
+static const GtkRadioActionEntry radio_action_entries[] =
+{
+    { "encoding-utf8", NULL, N_ ("UTF-8"), NULL, NULL, 0, },
+    { "encoding-cp1251", NULL, N_ ("Russian (CP1251)"), NULL, NULL, 1, },
+    { "encoding-koi8r", NULL, N_ ("Russian (KOI8-R)"), NULL, NULL, 2, },
+};
+
+static const gchar* radio_action_encoding_names[] = 
+{
+    "UTF-8",
+    "CP1251",
+    "KOI8-R",
+};
+
 
+static GHashTable* enc2widget;
+static GHashTable* term2enc;
 
 G_DEFINE_TYPE (TerminalWindow, terminal_window, GTK_TYPE_WINDOW);
 
@@ -244,7 +270,7 @@
 
 static void
 terminal_window_class_init (TerminalWindowClass *klass)
-{
+{ 
   GtkWidgetClass *gtkwidget_class;
   GObjectClass   *gobject_class;
   
@@ -255,6 +281,10 @@
   gtkwidget_class = GTK_WIDGET_CLASS (klass);
   gtkwidget_class->show = terminal_window_show;
 
+  //initializing hash tables
+  enc2widget = g_hash_table_new(NULL, NULL);
+  term2enc = g_hash_table_new(NULL, NULL);
+
   /**
    * TerminalWindow::new-window
    **/
@@ -282,8 +312,6 @@
                   G_TYPE_OBJECT);
 }
 
-
-
 static void
 terminal_window_init (TerminalWindow *window)
 {
@@ -309,8 +337,11 @@
                             G_CALLBACK (terminal_window_update_mnemonics), window);
 
   window->action_group = gtk_action_group_new ("terminal-window");
+  window->encoding_action_group = gtk_action_group_new ("terminal-window-encoding");
   gtk_action_group_set_translation_domain (window->action_group,
                                            GETTEXT_PACKAGE);
+  gtk_action_group_set_translation_domain (window->encoding_action_group,
+                                           GETTEXT_PACKAGE);
   gtk_action_group_add_actions (window->action_group,
                                 action_entries,
                                 G_N_ELEMENTS (action_entries),
@@ -319,9 +350,17 @@
                                        toggle_action_entries,
                                        G_N_ELEMENTS (toggle_action_entries),
                                        GTK_WIDGET (window));
-
+  
+  gtk_action_group_add_radio_actions (window->encoding_action_group,
+                                       radio_action_entries,
+                                       G_N_ELEMENTS (radio_action_entries),
+                                       0,
+                                       G_CALLBACK (terminal_window_action_set_encoding),
+                                       GTK_WIDGET (window));
+  
   window->ui_manager = gtk_ui_manager_new ();
   gtk_ui_manager_insert_action_group (window->ui_manager, window->action_group, 0);
+  gtk_ui_manager_insert_action_group (window->ui_manager, window->encoding_action_group, 0);      
 
   xfce_resource_push_path (XFCE_RESOURCE_DATA, DATADIR);
   file = xfce_resource_lookup (XFCE_RESOURCE_DATA, "Terminal/Terminal.ui");
@@ -329,11 +368,37 @@
 
   if (G_LIKELY (file != NULL))
     {
+        
       if (gtk_ui_manager_add_ui_from_file (window->ui_manager, file, &error) == 0)
-        {
-          g_warning ("Unable to load %s: %s", file, error->message);
-          g_error_free (error);
-        }
+          {
+              g_warning ("Unable to load %s: %s", file, error->message);
+              g_error_free (error);
+          }
+
+      {
+          int i;
+          for (i = 0; i < G_N_ELEMENTS(radio_action_entries); i++)
+              {
+                  gint new_id;
+                  GString* path;
+                  GtkWidget* menu_item_widget;
+
+                  new_id = gtk_ui_manager_new_merge_id(window->ui_manager);
+                  gtk_ui_manager_add_ui(window->ui_manager, 
+                                        new_id,
+                                        "/main-menu/Encoding", 
+                                        radio_action_entries[i].label,
+                                        radio_action_entries[i].name,
+                                        GTK_UI_MANAGER_MENUITEM,
+                                        FALSE);
+
+                  path = g_string_new("/main-menu/Encoding/");
+                  g_string_append(path, radio_action_entries[i].label);
+                  menu_item_widget = gtk_ui_manager_get_widget(window->ui_manager,
+                                                                        path->str);
+                  g_hash_table_insert(enc2widget, (gpointer)radio_action_encoding_names[i], (gpointer)menu_item_widget);
+              }
+      }
       gtk_ui_manager_ensure_update (window->ui_manager);
       g_free (file);
     }
@@ -452,10 +517,14 @@
 
   g_object_unref (G_OBJECT (window->preferences));
   g_object_unref (G_OBJECT (window->action_group));
+  g_object_unref (G_OBJECT (window->encoding_action_group));
   g_object_unref (G_OBJECT (window->ui_manager));
 
   g_free (window->startup_id);
 
+  g_hash_table_destroy(enc2widget);
+  g_hash_table_destroy(term2enc);
+
   (*G_OBJECT_CLASS (terminal_window_parent_class)->finalize) (object);
 }
 
@@ -886,10 +955,34 @@
   TerminalScreen *terminal;
   gint            grid_width;
   gint            grid_height;
+  gpointer       *encoding;
+  
 
   terminal = terminal_window_get_active (window);
   if (G_LIKELY (terminal != NULL))
     {
+        GtkWidget* encoding_menu_item;
+
+        //restoring current terminal encoding info
+        encoding = g_hash_table_lookup(term2enc, (gconstpointer)terminal);
+        if (encoding == NULL){
+            const char* current_encoding_var = getenv("ENCODING");
+            if (current_encoding_var != NULL){
+                int i = 0;
+                for (i = 0; i < G_N_ELEMENTS(radio_action_encoding_names); i++)
+                    if (strcmp(radio_action_encoding_names[i], current_encoding_var) == 0){
+                        encoding = (gpointer)radio_action_encoding_names[i];
+                    }
+            }
+            if (encoding == NULL)
+                encoding = (gpointer)radio_action_encoding_names[0];
+            g_hash_table_insert(term2enc, (gpointer)terminal, encoding);
+        }
+        encoding_menu_item = g_hash_table_lookup(enc2widget, encoding);
+        if (GTK_IS_WIDGET(encoding_menu_item))
+            gtk_menu_item_activate(GTK_MENU_ITEM(encoding_menu_item));
+
+
       /* FIXME: This isn't really needed anymore, instead we
        * could grab the grid size of the previously selected
        * page and apply that to the newly selected page.
@@ -1078,6 +1171,7 @@
   gint            npages;
   gint            grid_width;
   gint            grid_height;
+ 
 
   npages = gtk_notebook_get_n_pages (GTK_NOTEBOOK (window->notebook));
   if (G_UNLIKELY (npages == 0))
@@ -1098,6 +1192,8 @@
       active = terminal_window_get_active (window);
       if (G_LIKELY (active != NULL))
         {
+            g_hash_table_remove(term2enc, (gpointer)active);
+
           terminal_screen_get_size (screen, &grid_width, &grid_height);
           terminal_window_set_size_force_grid (window, active, grid_width, grid_height);
         }
@@ -1218,6 +1314,21 @@
     terminal_screen_paste_clipboard (terminal);
 }
 
+static void
+terminal_window_action_set_encoding (GtkRadioAction       *action,
+                                      GtkRadioAction      *current,
+                                     TerminalWindow  *window)
+{
+  TerminalScreen *terminal;
+  
+  terminal = terminal_window_get_active (window);
+  if (G_LIKELY (terminal != NULL))
+  {
+    gint current_value = gtk_radio_action_get_current_value(action);
+    terminal_screen_set_encoding (terminal, radio_action_encoding_names[current_value]);
+    g_hash_table_insert(term2enc, (gpointer)terminal, (gpointer)radio_action_encoding_names[current_value]);
+  }
+}
 
 
 static void
@@ -1822,3 +1933,4 @@
 
   return result;
 }
+