I think making IDN work the way it does was a mistake. I thought of making IDN with a character set specific for that use (I did think about how it would work) instead of using Unicode or any other existing character sets (none of them are suitable, as far as I am concerned; however, this new IDN character set would potentially be suitable for some other uses such as perhaps package names). Using one character set for everything is not very good, and Unicode is especially bad for this. (Although in my opinion, TRON code is generally better than Unicode, neither TRON code nor Unicode is the one to use for this)
However, there are other problems with paste in the terminal window, but bracketed paste mode can mitigate some of these problems in some cases, it is not entirely helpful.