That text as a query string should be URL-decoded to UTF-8 as expected automatically. Are you using any special decoding statement in Vortex (e.g. `<strfmt "%...">'); if so what?
It may be that the web server is altering the encoding before it reaches Vortex. Try printing the variable re-URL-encoded, so we can see what bytes it contains: `<fmt "t=[%U]\n" $t>'. That should print `t=[%C3%93lafur]'; if not, the web server might be altering `t' first.
Could be the class; the classes are dependent on the current locale, which may not be set or obvious, and in any event REX and its classes are byte-based so the latter may not work as expected on UTF-8 data.
For that warning, add something like this index expression:
[\alnum\x80-\xff]{1,70}
It needs to include hi-bit characters; the default expression of `alnum{2,99}' only includes 7-bit ASCII.