Here's a hint at the source of the problem: http://www.in-ulm.de/~mascheck/locale/ " XFree86 Xlib calls setlocale(3), but with values in /usr/X11R6/lib/X11/locale/. If you - particularly after an upgrade - get a "Warning: locale not supported by Xlib, locale set to C", then have a look into locale.alias in that directory and adjust it, in case. (Details from Olav Kvittem.) "
... The /usr/share/X11/locale dir contains these files: compose.dir locale.alias locale.dir Which may also need to be updated if/when one creates a custom locale. Note also: /etc/locale.gen /etc/locale.conf /etc/locale.alias /etc/environment At the end of this tutorial: http://askubuntu.com/questions/21316/how-can-i-customize-a-system-locale is the suggestion to add your custom locale (or make sure the locale you wish to use is found in there I guess) to this file: /usr/share/i18n/SUPPORTED Yet, after all the above have been updated, still no go starting a new xterm, still the error: "Warning: locale not supported by Xlib, locale set to C" I guess next step is to try logout/login, or reboot.