It's definitely *not* anything internal to TCC (or v29). All console window output is displayed by Windows, not TCC. (If you're running TCC in a TCMD tab window, that's going to be a bit different, but you haven't mentioned TCMD.)
We have a number of German beta testers who do not have this issue; hopefully one of them will jump in here.
I also have codepage 850. Entering öäü at the prompt and the resulting error works. See screenshot. Nevertheless, I have a strong suspicion that it is V29, since V28 is installed in parallel and works perfectly well.