Bug report 610299 points out this discrepancy:

>>> re.compile(r'\w{1}', re.U).sub('X', u'hello caf\xe9') 
u'XXXXX XXXX' 
>>> re.compile(r'\w', re.U).sub('X', u'hello caf\xe9') 
u'XXXXX XXX\xe9' 

The problem is in sre_compile.py: the call to 
_compile_charset near the end of _compile_info forgets to 
pass in the flags, so that the info charset is not compiled 
with re.U.  (The info charset is used when searching to find 
the first character at which a match could start; it is not 
generated for patterns beginning with a repeat like '\w{1}'.)

The attached patch changes this call to pass in the flags; it 
is against the 2.2.2 version of sre_compile.py.

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There's no uploaded file!  You have to check the
checkbox labeled "Check to Upload & Attach File"
when you upload a file.

Please try again.

(This is a SourceForge annoyance that we can do
nothing about. :-( )

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Sorry, I though I marked the checkbox (I know I went throught 
the browse button to find the file).  Anyway, here's the file.

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Grabbing this since effbot seems unresponsive.

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Thanks! 

Fixed in 2.3.  Keeping open for fixing in 2.2.3.

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Backport checked in.