Above method does work reliably.
Only 1 of my Ubuntus will not accept it - but then it isn't reading the current 
default locale of en_GB.UTF-8 either which is why its resorting to ANSI(ASCII). 
I might try just reinstalling Gnome Terminal. The Ubuntu in question is a 6.06 
LTS - but then others of these work OK.

Still it would be nice to have a Character Set option in GT Profiles.

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Cannot change default character encoding
https://bugs.launchpad.net/bugs/3923
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