There is work underway on having ZvtTerm support multi-byte Unicode characters. This work is nearing completion and should be available soon. It looks like this will be able to be done in a manner compatible with the current releases. This includes full display, selection and paste of Unicode encoded as UTF-8.
To properly support the display of many Asian languages the terminal must support multi-width characters. This is planned too. Probably a bi-width font implementation as I believe is used in the cxterm program. This may lead to proportional font support, but it may not.
Another feature that will be added eventually is a search facility. This will require an API change, and so will have to wait for the next major revision of gnome-libs.
Future extensions to the real xterm should be tracked as well, hopefully this will involve a low work load. Currently the code base is very stable and easy to maintain in this area. There are no plans to provide an absolutely complete implementation of a VT220 or other terminal - curses implementations just don't use some features so there is little pay-back for implementing every esoteric feature.
There are some minor portability issues, primarily in the pty code (which is most sensitive to portability problems), but apart from those the bug count is now very low. With any luck this will continue and I can move onto other work!