Typing and pasting "special" characters directly in emacs in xterm?

[Adam Funk]

When I'm running emacs as an X application (i.e. in it's own GUI
window) I have no problem typing £ and composed non-US characters (I
have a UK keyboard and the compose:rwin X option) and using X to copy
text including funny quotation marks (for example) and paste it into
emacs.

But when I run emacs -nw in xterm or over ssh in an xterm, it tends to
blow up when I do these things: the desired characters don't appear,
the point moves around and sometimes bits of text get deleted.

(I've tried googling for this but I apparently don't know the right
words to describe this problem.)

Any suggestions?

Thanks,
Adam