There already are names that don’t survive the wide-implemented IDNA preprocessing before punycode, there’s ambiguity about puny literals, and there’s names that transform differently between the most popular browsers.
My suggestion is that the official registration app should state the compatibility w/DNS. There are 3 possibilities:
- will encode reliably
- must be punycoded beforehand (some complex emoji)
- cannot be punycoded (check hyphen violations,
_$, puny literals, invalid puny:xn--💩, etc.)
I don’t see anything wrong with a small percentage of names being incompatible with DNS.