I use ansi-term for my normal terminal sessions. I tend to use unicode characters in my prompt to do things like set the trailing character based on the type of source cont
After getting a better understanding of term.el, the following works:
(defadvice ansi-term (after advise-ansi-term-coding-system)
(set-buffer-process-coding-system 'utf-8-unix 'utf-8-unix))
(ad-activate 'ansi-term)
Trying this with term-mode-hook is broken because in term.el, term-mode-hook is called before switching to the terminal buffer, so set-buffer-process-coding-system breaks due to the lack of a process associated with the buffer.