Ruby on Rails open URI issue with broken file source
===

I am having a hell of a problem here.
I'm using ruby on rails:
ruby 1.8.7 (2011-12-10 patchlevel 356)
rails 2.3.14

I'm trying a simple open with open-uri on the following address:

http://jollymag.net/n/10390-летни-секс-пози-във-водата.html

However the resulting file when read produces a weird (broken) string.
This was tested on ruby 1.9.3 and rails 3.2.x too.

    require 'open-uri'
    url = 'http://jollymag.net/n/10390-летни-секс-пози-във-водата.html'
    url = URI.encode(url)
    file = open(url)
    doc = file.collect.to_s # <- the document is broken
    document = Nokogiri::HTML.parse(doc,nil,"utf8") 
    puts document # <- the document after nokogiri has one line of content

I tried Iconv stuff and others but nothing works. The above code is more or less a minimal isolated case for the exact problem.

I appreciate any help since I'm trying to figure this bug for a couple of days now.

Regards,
Yavor