Hi!
The settings are correct, but it looks like the locales generation has failed last time the package has been installed. Could you try to run "dpkg-reconfigure locales", and send the possible error messages that happens during locales generation?
Sorry, I should have mentioned that I did run that to make sure, and the problem remained.
I see the same problem on another of my machines, also running Lenny, but this time i386 instead of amd64.
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