I was trying to decode mainly to get a UnicodeDecodeError automatically.
If I check if the char is not in the ASCII range (i.e. >0x7F) I think I'd have to set the error message for the UnicodeDecodeError manually and possibly duplicate it (unless we use a different error message that says that %c accepts only ASCII chars).
Also I agree that if u'%s' % chr(0x80) works when the default encoding is not ASCII, then %c should work as well. Trying to decode it with the default encoding and possibly let the UnicodeDecodeError propagate seems a good solution to me (and performance shouldn't be a problem here, since apparently no one uses u'%c' with non-ASCII byte strings).
I will try to make another patch.