When you paste a text containing Scandinavian/German characters, the result is gibberish.

It looks to me that the Scandinavian/German characters are stored as 16-bit values in the Mac's clipboard but PageStream assumes all characters to be 8-bit, because when you paste a Scandinavian/German character you'll get two garbage characters.

Try this again.
But now you choose a text-editor, instead of PGS.
Do the characters come out right?
1. If they don't: you have the problem maker, and it is not PGS.
2. If they do: paste those (copied from the text-editor!) into PGS. What happens now?

I haven't that problem, you probably guessed.
BTW those characters are called diacritical characters.

Yes, pasting to text editor works right.
Copying the diacritical characters from the text editor to PGS results the same gibberish as before.
The PGS's Preferences/Type/CharSet setting is "ISO 8859-01 (Western Europe)" which sounds right to me. My iMac's language is set to Finnish (Suomi).

This bug's product info should be "PageStream 5.0.5.8 (MacOSX)" and not "PageStream 5.0.4.31 (All Platforms)".

As expected, this worked fine for me. Usually this is going to be a problem with a specific program and not a general one. Mac applications can put the text in all kinds of formats, so I need to know what format was put on the clipboard and by what program.

The text is most likely in UTF8 format. If it was 16bit, then you would see odd characters between each character. PageStream supports a huge range of encoding methods, including UTF8. I would expect on the Mac your PageStream Type Preferences Character Set would be set to UTF-8 unless you had some very specific reason to change it.

I'm going to close this as "works for me", but if you can pass along additional details that allows someone else to reproduce the problem we can reopen it then.\n\n[Status updated to \'Works for Me\' on Thu, 29 Dec 2011 22:54:38 -0500]

An idea, maybe wrong:
What did you assign to CharSet?
CharSet is found in Preferences and Tab: Type.

For Windows I have: Windows.
I don't know what it should or could be for the Mac!
I am not even sure if CharSet = Windows for me is the best option. I have no problems at the moment (with copy and past).

I changed the charset to UTF-8 and pasting started to work.

I noticed an another problem: selecting UTF-16 character set and clicking Save makes PGS to crash. It happens every time. Shall I file a new bug report?

Great!

I have the UTF-16 crashing problem also. So please do!