While the iPod still lacks the capability to display Arabic, Hebrew, Hindi, Thai, Vietnamese, and various other complex scripts, it is fully Unicode-savvy for the 28 languages that are listed in its tech specs. You can display all of them on a single page of plain text as long as it is encoded in UTF-16. If you want to be able to demonstrate this for yourself, download the file ipodlangs16.txt from my iDisk, and put it in the Notes folder of your iPod. This is a selection from the UTF-8 Sampler Page, which provides the phrase "I can eat glass and it doesn't hurt me" in many languages.
The iPod can also display multilingual text in UTF-8 encoding as long as the text starts with a BOM (Byte Order Mark). TextEdit does not create UTF-8 with a BOM, so you need to save the text with a program like TextWranger which has that option. If you are curious about what a BOM does, see here.
iPod notes can only be 4K in length, but you can break longer texts into pieces of the right size with links from page to page using a program like Book2Pod.