I ran into the exact same problem while testing Perl6::Str, and I worked around it with the following sub, through which I piped all my output to diag(). It doesn't display the non-ASCII-Characters, but it does enable very detailed analysis even on non-utf-8 terminals: 
use charnames ();
sub escape_str {
    my $str = shift;
    $str =~ s{([^\0-\177])}{_N_escape($1)}eg;
    return $str;
}

sub _N_escape {
    return '\N{' . charnames::viacode(ord($_[0])) . '}';
}

[download]

However your post encouraged me to dig into Test::More source code, and in Test::Builder I found this code: 

sub _print_diag {
    my $self = shift;

    local($\, $", $,) = (undef, ' ', '');
    my $fh = $self->todo ? $self->todo_output : $self->failure_output;
    print $fh @_;
}

[download]

So it seems you have to get hold of a test builder object, and then binmode todo_output or failure_output (or both): 

$ perl -MTest::More -wle 'binmode Test::More->builder->failure_output,
+ ":utf8"; diag chr(228)'
# ä

[download]
Not pretty, but it works.

In reply to Re: How can I enable utf8 layer on Test::More diag output by moritz
in thread How can I enable utf8 layer on Test::More diag output by mje

Title:
Use:  <p> text here (a paragraph) </p>
and:  <code> code here </code>
to format your post, it's "PerlMonks-approved HTML":


  • Posts are HTML formatted. Put <p> </p> tags around your paragraphs. Put <code> </code> tags around your code and data!
  • Titles consisting of a single word are discouraged, and in most cases are disallowed outright.
  • Read Where should I post X? if you're not absolutely sure you're posting in the right place.
  • Please read these before you post! —
  • Posts may use any of the Perl Monks Approved HTML tags:
    a, abbr, b, big, blockquote, br, caption, center, col, colgroup, dd, del, details, div, dl, dt, em, font, h1, h2, h3, h4, h5, h6, hr, i, ins, li, ol, p, pre, readmore, small, span, spoiler, strike, strong, sub, summary, sup, table, tbody, td, tfoot, th, thead, tr, tt, u, ul, wbr
  • You may need to use entities for some characters, as follows. (Exception: Within code tags, you can put the characters literally.)
            For:     Use:
    & &amp;
    < &lt;
    > &gt;
    [ &#91;
    ] &#93;
  • Link using PerlMonks shortcuts! What shortcuts can I use for linking?
  • See Writeup Formatting Tips and other pages linked from there for more info.