I'm afraid this cannot be resolved easily :-(

Yes, it is a local file that I'm trying to upload on my server (server is FileZilla 0.9.26 running on WinXP machine, I can copy the same file using FileZilla Client). My language for non Unicode programs is Croatian, I have all codepage conversion tables that are relevant to my language installed and my codepage in command propmt is 852 (checked using mode command, I don't know if this info is usefull :)). I tried setting "UTF8 encoding for filenames" to "On" but it doesn't help. When I try to copy the file WinSCP says that the file doesn't exit (System Error. Code: 2. The system cannot find the file specified). Plus, I can do what I want with the file in command prompt or Windows Explorer (renaming, deleting, moving...).

So it was local file, correct? What is your default language code page? Upgrade to the latest version of WinSCP.

Actually it did work for a couple of files with Uni. names, but it didn't work for
01_04. Yann Tiersen - Comptine D'un Autre Été L'après Midi, and when I right clicked it on the Local pane it disappeared...

Support for transfer of files with names containing Unicode characters would be nice :)