Python (currently) does not allow non-ASCII identifiers, so it's not surprising that Unicode parameter names don't work.

It's also a really bad idea to pass data from an AJAX XML or JSON request directly to a function without doing at least some post-processing of the data in order to prevent DOS attacks, code injection, etc.

dict((str(key), value) for key, value in kw.iteritems()) is all that's needed for the above. 

BTW, I don't think those few micro-seconds really matter in the face of XML or JSON decoding, network latency, etc. ;-)