I would just redirect it to another URL, that way what's in the browser is something meaningful and memorable, not xn--whatever. (Emil already said Google indexes the non-"xn--" version.)
Most interesting IDNs I think I've seen (the names, not the sites) are
www.£.com,
www.€.com and
www.¥.com. Although there isn't a www.$.com, because it's a disallowed ascii character, there is a
www.¢.com.
When I say 'seen them', BTW, I mean I've looked them up or seen them mentioned on other sites. I don't think I've ever seen an IDN in Google. I assume they must show up in foreign language Googles though.