utf-8 in interactive python session

[Luke]

Python doesn't seem to read UTF-8 properly from an interactive
session.  Am I doing something wrong?

luked at sor ~ $ echo $LANG
en_AU.UTF-8
luked at sor ~ $ python
Python 2.3.4 (#1, Aug 12 2004, 17:23:54)
[GCC 3.4.1  (Gentoo Linux 3.4.1, ssp-3.4-2, pie-8.7.6.3)] on linux2
Type "help", "copyright", "credits" or "license" for more information.
>>> import sys
>>> print sys.getdefaultencoding()
utf-8
>>> u'π'  # embedded greek letter 'pi' (possibly mangled by
google groups news client), should return u'\u03c0'
u'\xcf\x80'
>>> u'\u03c0'.encode()
'\xcf\x80'
>>>