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I see. For the XIST case, it probably would be best to
correct XIST, to always use explicit encodings.
Alternatively, would it be possible to pass byte strings
instead of Unicode objects to XIST in the cases which XIST
doesn't handle correctly? If not, why not?

If you cannot fix XIST, here is a work-around:

import sys
reload(sys)
sys.setdefaultencoding("desired encoding")

This is somewhat of a hack, but using a hack is ok if you
are looking for a work-around for a problem that really
should be fixed in the long run, anyway.

I don't understand the orm example. What is "each and every
setting"? Grepping the source of orm 1.0.1, the word
"setting" occurs only in two places, both apparently
irrelevant. If you are talking about some sort of
configuration file - wouldn't it be good to create a library
for the configuration file, and make only that library be
aware of the encoding of the configuration file?