I don't think there is a problem, Microsoft seem to have recognised it as an issue. They are clearly struggling to keep up, but at least they have entered the struggle.
The problem here though is that you are contributing on a Forum that has done nothing to recognise, the cultural, geographical or lingustic diversity of the market. Most of the contributors on this Forum haven't and probably don't know how to install fonts so they can actual see Chinese and Arabic characters, so all they see are little squares.
The whole point is though that progress is being made without them. When I started IDN we were astonished that we could get Chinese domains that produced xxM Google searches. At that point there was no Overture to my knowledge. Arabic didn't even produce any significant Google Searches, as the Arabic content was very low and there had only been half hearted attempts at doing any indexing.
Over a two year period things have changed dramatically, domains we have registered have keywords in Arabic that produce millions of Google searches and very healthy Overture in view of Yahoo's very late entry into the Arabic Market, and that fact that Overture probably only records Arabic searches made in the US.
In the South Asian languages they are now following the same pattern. Google scores are doubling and tripling within a month and languages like Punjabi and Kannada are actually producing Overture, which is incredible as the Unicode points on these scripts have only recently been established.
The use of local languages appears to require little or no marketing. It seems to spread like a virus. I have been amazed at the rate the Internet in places like Thailand has taken off. I have half a dozen Thai terms that already get 4 figure Overture scores and Google scores are already in the millions.
Best Regards
Dave Wrixon