You must have missed the recent additions of 'unvote'/'undown', deleting posts (I am not sure anymore, but don't think this was possible a few years ago), limiting edit time, much fewer (in my experience: no more) 'no such thing' errors when the cache expired, collapsible comment trees, etc.
These are all small improvements that made it a lot better. That the look hasn't changed for as long as I'm here, I'm quite happy about. If the alternative is something with loads of whitespace and Javascript like Reddit, Skype, etc., then please let us not update "the comment system from the early to mid 2000s".
It supports unicode. And indeed, for a while you could post emoji, until they were added to filters disallowing them. You can still find old posts containing them, rendering correctly.
Browser vendors have instituted a variety of different rules for this problem, include at least:
1. Decide (policy, enacted by humans) for each TLD if its registry has rules that will prevent abuse, if so whitelist this TLD and show IDNs as text for this TLD, everything else is punycode.
2. Algorithmically detect "confusing" IDNs and show punycode instead for those.
Yes. See http://xn--i-7iq.ws
Edit: HN does not let me enter emoji characters.