If we just restrict this to the file system encoding (and not the whole LANG setting), how about:

 * default the file system encoding to 'utf-8' and use the surrogate escape handler as default error handler
 * add a PYTHONFSENCODING env var to set the file system encoding to something else (*)

(*) I believe we discussed this at some point already, but don't remember the outcome.

Regarding the questions of defaulting to LANG=C.UTF-8: I think this needs some more thought, since it would also affect many C locale aware functions. To make this work, Python would have to call setlocale() early on in the startup phase to adjust the C lib accordingly.