Sorry, I only can comment this from Harmattan point-of-view, never having had the pleasure of owning a N900 device.
On Harmattan the buggy piece of code resides in /usr/lib/libsms.so.0.0.0 but as that is proprietary closed piece of code there's no way I can fix it...

If I had the source, I am sure I could fix da bug, test it, and package a correction in 2 hours tops ( + the time to set up my scratchbox installation, it's been while since I last compiled anything for Harmattan and it sure has rotted a bit...)

This is prime example why closed source is evil. The bug is probably just string length check failing when decoding input that contains multibyte characters...
The correct way for the messaging stack to handle this kind of exception is definitely not throwig its spoon to the corner and start crying, it should try to salvage the bits of the message it can decode, and replace the rest with "garbage chars"
On Symbian this works as expected, the multibyte chars end up looking like squiggly boxes but the 7-bit ascii part of the message is shown correctly.