As far as I can tell I shouldn\'t be using ÅÄÖ (somthing like they have no visual representation in ASCII??).
So what is considered more SEO friendly? Replacing i.e. all
In my opinion, if accented characters has to be retained for their real meaning, then it shouldn't be renamed.
Most case, replacing with the ASCII alphabet cousins should be good. E.g. replacing "résumé" with "resume" makes sense as that's what people search for and understand given the right context.
Else retain accented characters with the URL encoded representation, e.g:
%C5%C4%D6
will be the URL encoded representation for "ÅÄÖ".