(This is about v1.2 only, v1.1 will stay as it is.)
Until today Dovecot didn't care about mailbox names. IMAP RFC requires them to be modified-UTF-7, but Dovecot didn't try to enforce it in any way.
Mailbox names in Sieve scripts should be UTF-8, but currently Dovecot doesn't translate them to mUTF-7 as it should. Cyrus also did this until the latest release (v2.3.13).
Now that I finally today wrote code to do mUTF-7 <-> UTF-8 conversion, Dovecot can finally do the right thing. But should there be an option to keep things backwards compatible?
IMAP: CREATE command requiring the mailbox name to be valid mUTF-7 is probably ok. Several other servers already verify that mailbox names are valid, so I doubt there are clients left anymore that don't send mUTF-7 names.
deliver -m assumes now that the mailbox name is UTF-8 and converts it to UTF-7. Should there be a -7 parameter that changes this behavior back?
Stephan's Dovecot Sieve also needs to be changed so that the mailbox name in fileinto commands can be UTF-8. If -7 parameter is added, it could control this behavior too.
Also I'm wondering if in the future the mailbox names in filesystem should be converted to UTF-8. Probably not anytime soon though..
I also added imap_utf7 binary for doing mUTF-7 <-> UTF-8 conversion.