The Linux section just seems to be artifacts of the WSL hacks, it has nothing to do with how Linux filenames function. Those are simply bags of bytes, the encoding only matters for displaying them, and isn't interpreted internally. ls failing to access the .exe is clearly a WSL filesystem issue and not a Linux / ls issue. You also can't set a UTF-16 locale because that's not what a locale is. UTF-16/32 vs SBCS and UTF-8 is the wide/narrow character distinction, which is a whole separate thing, different ABIs, different APIs.
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The Linux section just seems to be artifacts of the WSL hacks, it has nothing to do with how Linux filenames function. Those are simply bags of bytes, the encoding only matters for displaying them, and isn't interpreted internally. ls failing to access the .exe is clearly a WSL filesystem issue and not a Linux / ls issue. You also can't set a UTF-16 locale because that's not what a locale is. UTF-16/32 vs SBCS and UTF-8 is the wide/narrow character distinction, which is a whole separate thing, different ABIs, different APIs.
WSL-to-Windows, yes, it is due to translations. But within the WSL, not sure. I'll try to replicate them on a Ubuntu VM for comparison.