How Do You Optimize a URL for Arabic Sites?

On Cre8asite Forums, Rand Fishkin asks an interesting question: how do you create search-friendly URLs out of foreign characters, particularly Arabic?

Ammon Johns says that DMOZ can handle it, so it should be spiderable content.

A.N.Onym says that he creates the URLs to look friendly to native Arab speakers:

One thing that our local webmasters do is to write the words using Latin letters for the corresponding letters from the language. While it doesn't help with the search engines, it makes the URLs appear in the native language (albeit using Latin alphabet) and such URLs are easier to use (remember, refer and link to), too.

Pierre aka eKstreme has subsequently responded in his own blog post with a few considerations.

How do you optimize URLs for a foreign language that doesn't use the Latin character set?

Forum discussion continues at Cre8asite Forums.