Okay, I found out how to declare encoding, but it's still wonky. It seems the plugin config dialog does not display utf8. So I encoded it as ISO-8859-1, which works for me, but if other ppl install it via plugin installation, the umlauts get killed again, it seems like there is an automatic utf8 conversion or something.
I just rephrased the two sentences I had, but I thought I should at least mention it