I'm using Windows XP Service Pack 3 with Active Perl 5.8.9.

Works fine at least as far back as ActivePerl 5.10.1 build 1007 (the oldest I have).

>perl -E"$_ = qq{execu\x{e7}\x{e3}o}; utf8::downgrade($_); say $_ eq u
+npack('A*', $_) ?1:0"
1

>perl -E"$_ = qq{execu\x{e7}\x{e3}o}; utf8::upgrade($_); say $_ eq unp
+ack('A*', $_) ?1:0"
1
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IIRC, lots of pack/unpack fixes concerning non-byte strings went into 5.10.