The domain names should be in latin. However with file names seems like the LAMP server can create file names in cyrilic , also Firefox displays URLs that include a filename in cyrilic. So is cyrilic supported by Web Standards and companies ( google ) for the file name part of the url.
Yes it is supported. You can check the Bulgarian version of Wikipedia for example ( http://bg.wikipedia.org ). Non-latin domain names are also available.
Cool. Eccept IE8 displays some letter code in the addressbar - ASCI or something instead of the actual cyrilic text. Maybe an option rooted somewhere. Other browsers seem fine.