Of course, to fix this particular issue a check such as

if $TERM =~? '^rxvt-unicode' || &term =~? '^rxvt-unicode'

would be sufficient, but maybe this is not the only manifestation of incompatibilities arising from changing the encoding.

The issue is that Vim (not Neovim) overlaps meta maps with valid UTF-8 characters:

:echo "\<M-[>"
Û
:echo "\<M-]>"
Ý

If you map these the UTF-8 encoding, then it becomes impossible to type Û and Ý. Temporarily changing the encoding works around this, but the resulting maps don't work in every terminal.

Copilot.vim will always error on the side of not breaking the user's ability to type. If you're happy with the trade-off, then mapping in your vimrc is the solution.

I am happy without Û and Ý for coding, but I was unhappy while trying to make these mappings work, assuming that the mappings set by this plugin are the same as that in vimrc.
Since this is nowhere documented, how is a user supposed to know this?

It's covered under a generic caveat found in the help file:

Note that M- (a.k.a. meta or alt) maps are highly dependent on your terminal
to function correctly and may be unsupported with your setup.

I'll see if I can make that a bit clearer.

Note that M- (a.k.a. meta or alt) maps are highly dependent on your terminal
to function correctly and may be unsupported with your setup.

This was expected. What was unexpected was that the plug-in changes &encoding for these mappings.