[SQLObject] troubles with unicode

I am lost,
trying to find solution whole night long.

all attempts to call the set method (see bellow) are finishing:

Page handler: <bound method ProdejniMista.ulozeniProdejnihoMista of
<fantomas.controllers.ProdejniMista instance at 0x2ac67a0>>
Traceback (most recent call last):
  File "/usr/lib/python2.5/site-packages/CherryPy-2.3.0-py2.5.egg/cherrypy/_cphttptools.py",
line 121, in _run
    self.main()
  File "/usr/lib/python2.5/site-packages/CherryPy-2.3.0-py2.5.egg/cherrypy/_cphttptools.py",
line 264, in main
    body = page_handler(*virtual_path, **self.params)
  File "<string>", line 3, in ulozeniProdejnihoMista
  File "/usr/local/lib/python2.5/site-packages/TurboGears-1.0.8-py2.5.egg/turbogears/controllers.py",
line 360, in expose
    *args, **kw)
  File "<string>", line 5, in run_with_transaction
  File "/usr/local/lib/python2.5/site-packages/TurboGears-1.0.8-py2.5.egg/turbogears/database.py",
line 359, in so_rwt
    retval = func(*args, **kw)
  File "<string>", line 5, in _expose
  File "/usr/local/lib/python2.5/site-packages/TurboGears-1.0.8-py2.5.egg/turbogears/controllers.py",
line 373, in <lambda>
    mapping, fragment, args, kw)))
  File "/usr/local/lib/python2.5/site-packages/TurboGears-1.0.8-py2.5.egg/turbogears/controllers.py",
line 410, in _execute_func
    output = errorhandling.try_call(func, *args, **kw)
  File "/usr/local/lib/python2.5/site-packages/TurboGears-1.0.8-py2.5.egg/turbogears/errorhandling.py",
line 77, in try_call
    return func(self, *args, **kw)
  File "/TG_web/fantomas/controllers.py", line 305, in ulozeniProdejnihoMista
    prodMisto.set(**slovnikArgumentu)
  File "/usr/lib/python2.5/site-packages/SQLObject-0.10.1-py2.5.egg/sqlobject/main.py",
line 1120, in set
    self._connection._SO_update(self, args)
  File "/usr/lib/python2.5/site-packages/SQLObject-0.10.1-py2.5.egg/sqlobject/dbconnection.py",
line 509, in _SO_update
    for dbName, value in values]),
UnicodeDecodeError: 'ascii' codec can't decode byte 0xc3 in position
33: ordinal not in range(128)


I have tried all possible combination to decode/encode the field values and
I am really sure all filelds are unicode fields when i am trying call the
set method.



automat.set(**slovnikArgumentu)


automat.set(telKontaktniOsoby =
slovnikArgumentu[telKontaktniOsoby].encode("utf-8"),
            najemZaRokBezDph =
slovnikArgumentu[najemZaRokBezDph].encode("utf-8"),
            kontaktniOsobaPrijmeni =
slovnikArgumentu[kontaktniOsobaPrijmeni].encode("utf-8"),
            nazevKontaktMistaPoruchy =
slovnikArgumentu[nazevKontaktMistaPoruchy].encode("utf-8"),
            psc = slovnikArgumentu[psc].encode("utf-8"),
            mesto = slovnikArgumentu[mesto].encode("utf-8"),
            adresa2 = slovnikArgumentu[adresa2].encode("utf-8"),
            adresa1 = slovnikArgumentu[adresa1].encode("utf-8"),
            zemDelka = slovnikArgumentu[zemDelka].encode("utf-8"),
            zemSirka = slovnikArgumentu[zemSirka].encode("utf-8"),
            elektrinaZaRokBezDph =
slovnikArgumentu[elektrinaZaRokBezDph].encode("utf-8"),
            cisloSignysPartnera =
slovnikArgumentu[cisloSignysPartnera].encode("utf-8"),
            pmid = slovnikArgumentu[pmid].encode("utf-8"),
            telReseniPoruchy =
slovnikArgumentu[telReseniPoruchy].encode("utf-8"),
            nazevProdejnihoMista =
slovnikArgumentu[nazevProdejnihoMista].encode("utf-8"),
            dnuRokOtevreno =
slovnikArgumentu[dnuRokOtevreno].encode("utf-8"),
            kontaktniOsobaJmeno =
slovnikArgumentu[kontaktniOsobaJmeno].encode("utf-8"))


My Environment:
Ubuntu Hardy Heron 64bit minimal server install

vs2521:/TG_web# yolk -l
Cheetah         - 2.4.4        - active
CherryPy        - 2.3.0        - active
DecoratorTools  - 1.8          - active
Extremes        - 1.1.1        - active
FormEncode      - 1.2.4        - active
Markdown        - 2.1.1        - active
PIL             - 1.1.6        - active
Paste           - 1.7.5.1      - active
PasteDeploy     - 1.5.0        - active
PasteScript     - 1.7.5        - active
PyProtocols     - 1.0a0dev-r2302 - active
Python          - 2.5.2        - active development
(/usr/lib/python2.5/lib-dynload)
RuleDispatch    - 0.5a1.dev-r2506 - active
SQLObject       - 0.10.1       - active
TurboCheetah    - 1.0          - active
TurboGears      - 1.0.10       - non-active
TurboGears      - 1.0.8        - active development
(/usr/local/lib/python2.5/site-packages/TurboGears-1.0.8-py2.5.egg)
TurboJson       - 1.1.4        - active
TurboKid        - 1.0.5        - active
configobj       - 4.7.2        - active
egenix-mx-base  - 3.2.2        - active
kid             - 0.9.6        - active
kinterbasdb     - 3.3.0        - active
pip             - 1.0.2        - active
pygooglechart   - 0.3.0        - active
setuptools      - 0.6c11       - non-active
setuptools      - 0.6c12dev-r88846 - active
setuptools      - 0.6c8        - non-active
simplejson      - 2.3.2        - active
wsgiref         - 0.1.2        - active development (/usr/lib/python2.5)
yolk            - 0.4.1        - active

Thanks for your hints

Petr