Domain names should never have non-ascii in them.  They should be IDNA encoded.  There is a known problem where Windows will return non-ascii domain names if the local hostname is configured naively (see issue 9377).  SMTPUTF8 might be a workaround in smtpd's case, since I think it will allow handling of such domain names, but that could actually be considered an RFC violation in smtpd if it works :)

That said, looking at the traceback I'm not convinced that's the problem.  The test using support.HOST, and that is 127.0.0.1.