Yes, this is a consequence of using the Windows ANSI API instead of the wide-character version. I don't really do much Windows programming, and I've never done any I18N work on Windows. I'm not sure how much work it would be to convert VBinDiff to the W API. I'd be interested in a patch if somebody wants to try.
The workaround is to rename the file so it can be represented in the selected codepage.
Originally posted by @madsen in #20 (comment)