Adwords Editor the tool that most Adwords advertisers use to upload campaigns was recently updated to be IDN friendly. The new version allows for native IDN domains as the display URL. You still have to upload punicode for the destination URL.
This is really good progress to see technology giants become more & more IDN friendly.
Here’s the release update
http://www.google.com/support/adwordseditor/bin/answer.py?answer=1409692
