HEAD doesn't z-encode external-core output (unlike 6.4). I suppose, that
this is unwanted behaviour. It probably results from this patch:

========================================================================
Fri Jan  6 17:30:19 CET 2006  simonmar
  * [project @ 2006-01-06 16:30:17 by simonmar]
  Add support for UTF-8 source files

[...]    

Z-encoding has been moved right to the back end.  Previously we
used to Z-encode every identifier on the way in for simplicity,
and only decode when we needed to show something to the user.
Instead, we now keep every string in its UTF-8 encoding, and
Z-encode right before printing it out.

[...]
========================================================================

Greetings
Jan