The simples solution i could come up with, convert all chars to their base (á -> a), using String.tr would be ideal for this task, but its not UTF8 aware…

If you dare to digg deeper, more information can be found on wiki and on coding horror

list.sort_by{|name| convert_umlaut_to_base(name)}

  def convert_umlaut_to_base(input)
    text = input.dup
    %w[áäa ÁÄA óöo ÓÖO íi ÍI úüu ÚÜU ée ÉE ßs].each do |set|
      text.gsub!(/[#{set[0..-2]}]/,set[-1..-1])
    end
    text
  end