Recently, I have been playing around a lot with color in the terminal and, therefore, with escape sequences, too. I've read the relevant parts of the Bash manpage along with numerous helpful pages on the Net.
I've got most of what I want working; a nice color Bash prompt, for example.
When I press certain keys (e.g. German umlauts) in the bash command line, I get escape sequences. For example, ß gives me \303. These escape sequences are treated as single characters, so one backspace deletes the whole sequence.