Yes, the ProxySG and subsequent technologies (WebPulse, Blue Coat Web Filter, and Blue Coat's Site Review) support ICANN's international domain names (IDN).
The DNS naming system is based upon ASCII characters. When an IDN is typed into the browser, the web browser is responsible for converting the non-ASCII strings into a set of ASCII characters. The domain name as represented in ASCII characters is then sent on to DNS so the name can be resolved, or the browser's GET request is forwarded to the proxy and the proxy does the DNS lookup using the ASCII characters given to it by the browser. Blue Coat Web Filter rates the web sites by their ASCII form and the Site Review site knows how to convert international domain names into ASCII characters.
For full details on IDN and some of the technologies used for IDN, please see the following: