Switching to binmode and manually picking the encoding from the $ENV seems to work for me:

#!/usr/bin/perl
use strict;
use warnings;

open my $in, '-|:encoding(utf8)', "echo \xc3\xb6" or die $!;
my $enc = $ENV{LC_ALL};
$enc =~ s/.*\.//; # TODO: en_US with no encoding not handled.
binmode STDOUT, "encoding($enc)";

my $line = <$in>;
chomp $line;

print "I read a line, that is ", length $line, " chars long.\n";

print "That line is: $line\n";
$line =~ s/\x{f6}/o/;
print "That line in ascii is: $line\n";
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Update

It seems all that's needed in your original code is to remove the local encoding from the input:

open my $in, '-|:raw:encoding(utf8)', "echo \xc3\xb6" or die $!;
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