I have a domain with a special character (german 'ü'). Firefox shows the favicon but WebKit.app does NOT. the domain is http://market-küchen.com
<rdar://problem/7981077>
This seems to work fine in Safari 6
The site just has a redirect to a non-IDN URL now, so it's not clear if the underlying issue got fixed.
OTOH, favicon on http://www.מיץפטל.com does work, so maybe the underlying problem got fixed indeed.