--- xt-mouse.new.el	2010-08-27 09:22:47.640625000 +0200
+++ xt-mouse.utf-8.el	2010-08-27 11:02:20.031250000 +0200
@@ -120,16 +120,36 @@
   pos)
 
 ;; read xterm sequences above ascii 127 (#x7f)
-(defun xterm-mouse-event-read ()
-  (let ((c (read-char)))
+(defun xterm-mouse-pos-read ()
+  "Read positions from an xterm mouse escape sequence.
+
+This job is complicated because xterm can emit (px py) pairs
+which look like (possibly invalid) UTF-8 sequences which emacs
+dutifully decodes into unicode characters.
+
+UTF-8 sequencing can occur any time px and py are both greater
+than #x80.  For terminals smaller than 128x128, this function can
+correct the problem because only px can trigger the
+confusion. Terminals taller than 128 lines pose a more difficult
+problem because the py can look like the start of a 2-byte UTF-8
+sequence, and xterm sends no sequence terminator which we could
+use to detect the 'EOF'. This tends to leave emacs waiting for
+input after mouse-up."
+  (let* ((c (read-char))
+	 (b (multibyte-char-to-unibyte c)))
     (cond
      ;; mouse clicks outside the encodable range produce 0
-     ((= c 0) #x100)
-     ;; 8-bit control characters which don't pair up with the next
-     ;; char come back as "pseudo-negative", e.g. #x3fff??
-     ((> c #x7ff) (logand c #xff))
+     ((eq b 0) (cons #x100 (multibyte-char-to-unibyte (read-char))))
+     ;; emacs treats some combinations of px py like utf-8
+     ((or
+       ;; normal ("C2") sequences don't convert back to a single byte
+       (eq b -1)
+       ;; illegal ("C0") sequences convert back to one (legal) char
+       (not (eq c (unibyte-char-to-multibyte b))))
+      ;; pick the char apart into two bytes
+      (cons (+ #xc0 (lsh c -6)) (+ #x80 (logand c #x3f))))
      ;; normal case
-     (c))))
+     ((cons b (multibyte-char-to-unibyte (read-char)))))))
 
 (defun xterm-mouse-truncate-wrap (f)
   "Truncate with wrap-around."
@@ -148,9 +168,10 @@
 
 (defun xterm-mouse-event ()
   "Convert XTerm mouse event to Emacs mouse event."
-  (let* ((type (- (xterm-mouse-event-read) #o40))
-	 (x (- (xterm-mouse-event-read) #o40 1))
-	 (y (- (xterm-mouse-event-read) #o40 1))
+  (let* ((type (- (read-char) #o40))
+	 (pos (xterm-mouse-pos-read))
+	 (x (- (car pos) #o40 1))
+	 (y (- (cdr pos) #o40 1))
 	 ;; Emulate timestamp information.  This is accurate enough
 	 ;; for default value of mouse-1-click-follows-link (450msec).
 	 (timestamp (xterm-mouse-truncate-wrap