It worked fine to add the punyencoded IDN name to the custom domain list, but my server does not repsond to requests and instead I get a default Azure Error "404 - Web Site not found!" page (indicating that the request at least goes to Azure).
Does anyone know if there is a way to get it to work?
Using the new portal I was able to type in the actual local characters (instead of the punyencoded) and then even if there was no new entries added (maybe because the punyencoded allready was there) it started to work.
Leason learned: Use the NEW portal even if it's in preview!