RubyString incorrect handling of utf-8

Reproduce the bug with

import org.jruby.Ruby;
import org.jruby.RubyString;

public class MyTest { 
  public static String hello(String name) {
    Ruby r = (Ruby)Ruby.getDefaultInstance();
    return r.newString("Hello " + name).toString();
  }
}

and a test file (to prevent shell funkiness)

spinäl

jruby -e "require 'rubygems' ; include_class 'MyTest' ; p MyTest.hello(IO.readlines('test_file.txt').first)"

Run with jruby 1.1.6, the correct result is
"Hello spin\303\244l"

Run with jruby 1.3.1, the utf-8 characters are incorrectly unicoded as well
"Hello spin\303\203\302\244l"

The commit that introduced the bug http://github.com/jruby/jruby/commit/4f4595e09bcfd817a64c41b4badff5f8ebf3aa4f

This bug is related to http://jira.codehaus.org/browse/JRUBY-3732