Some old terminal emulators cannot work with UTF8.
I used AniTa which had the same problem connecting to a Caché Unicode server.
I tried TeraTerm which is free and can at least work with UTF8 and VT320 emulation, but i haven't tried all our terminal tricks yet to see if it can do the job for 100%.
Once you start TeraTerm, don't forget to change in Setup->General the language to UTF-8,.
Setup -> Save Setup will save all your changes to a Teraterm.ini file so they will be in effect the next time.