I have several directories on a Debian 'testing' system [openssl 0.9.7g-2, ssh 3.8.1p1-8.sarge.4, server runs in en_US.UTF-8 locale] containing several directory names with Czech national characters in UTF-8 enconding. Every time when I try to list those directories, I get complaints about an error when decoding UTF-8 text and only a part of the directory contents is displayed.
I have not checked the directory for improper UTF-8 characters, but I think that even if there are some inconsistencies, WinSCP should be able to handle such cases without messing up the directory listing. Moreover, I can see these listings properly in FileZilla, putty (Unix shell 'ls' output), and when accessing these directories as Samba 3 shares. From what I have seen, I am not aware of any suspicious characters that would spoil the listing.
I have first encountered this bug with Servant Salamander beta 10 WinSCP plugin, just installed WinSCP 3.7.6 and it does the same thing. I have just downgraded to WinSCP 3.6.8 and it works like charm ...