Is this a bug? If not, can someone explain the reasoning behind it?

When creating a character for a game today, my GM and I realized that the 'ä' in the character's name was not allowed in either the actual name, or in the character's bio lines. The latter, in particular, seems even more wonky to me than the special characters not being supported as part of the actual name.

I noticed this too with Gaelic names. I don't believe it is a glitch, just a site text format restriction. I simplified things for myself by ignoring umlauts in favor of plain letters. Not a perfect solution from a pronunciation standpoint, but it's certainly a lot less confusing than having things spelled with and without which makes it look different in threads/profiles. I also don't expect players to use umlauts in their posts as it's time consuming, so dropping them altogether makes the most sense in my case.
This message was last edited by the user at 19:31, Tue 16 Aug 2016.

No, definitely not a bug.  A deliberate choice because these characters can cause issues in places like the character name and bio lines.

It appears that the bio lines should accept ä such to show a "ä"

Tags and character names would appear to be a no, however.