Postgresql 7.4 on cygwin, upper() does not work with german special characters (umlaut)

Hi all,

we are running postgresql 7.4 under cygwin (the package delivered with
cygwin)
under german Windows XP Professional SP1 an we experience the following
problem:

- first off all we are not able to enter german special characters such
as ÄÖÜ in
  the cygwin shell, but we are able to enter them in an editor (eg. vi).
That should not
  be too bad...
- when we perform a "select upper('ÄäÖöÜüAaOoUu');" we get the following
result:

     upper
---------------
 ÄäÖöÜüßAAOOUU
(1 row)

The special characters are not converted to capital letters! If we run
the same query against postgresql 7.4 on a linux-platform the special
characters are correctly returned in capital letters.
Any suggestions or solutions are welcome!

Kind regards
Sebastian