If you execute an invalid SQL statement with arcpy.ArcSDESQLExecute(), it will return an error message with a unicode special character (see ArcSDESQLExecute_Error.gif). That unicode character in the error message actually causes an error with Python if you try to print the message (see PythonUnicode_Error.gif). Apparently this is a known Python issue.
I found you have to wrap the arcpy error message up in encoding so Python doesn't choke (haha).
except Exception as err: raise Exception(unicode(err.message).encode("utf-8"))
Why is this silly unicode character in an error message anyway? Has anyone else found a better way to deal with this?