The supported version and the trunk of pyreadline launchpad.net/pyreadline no long relies on sys.stdout for the encoding for the Windows console.

Getting .encoding from sys.__stdout__ seems reasonable.  If taken from sys.stdout at very last moment, only referencing sys.__stdout__ if sys.stdout is missing .encoding might be optimal, but since the bug was in pyreadline, and it is no longer trying to get .encoding from sys.stdout (which it shouldn't do anyway, because no guarantee is made that sys.stdout even has an attr .encoding), the whole point may be moot.

I rely on your judgement.  Since I only use the supported version of pyreadline, the error no longer happens in the unpatched code.