diff --git a/scripts/desktop-update/runtime.ps1 b/scripts/desktop-update/runtime.ps1
index 283b02b0db..46bf8eec9d 100644
--- a/scripts/desktop-update/runtime.ps1
+++ b/scripts/desktop-update/runtime.ps1
@@ -9,7 +9,20 @@ function Get-HermesRuntimeCommand {
     foreach ($name in @('hermes.exe', 'hermes.cmd')) {
         $launcher = Join-Path $InstallRoot ".hermes\bin\$name"
         if (Test-Path -LiteralPath $launcher -PathType Leaf) {
-            $json = & $launcher --print-runtime-command --module $Module
+            # A machine boundary that names executables under the profile.
+            # The JSON is ASCII-escaped today (json.dumps default), but every
+            # other consumer of this boundary (hermes_cli.windows_ssh_runtime,
+            # the Electron updater, the Rust bootstrap) decodes it as UTF-8;
+            # scope the capture to the same contract so the boundary stays
+            # byte-exact if the emitter ever stops escaping, and so a
+            # non-ASCII path cannot arrive OEM-decoded (#124526).
+            $previousNativeOutputEncoding = [Console]::OutputEncoding
+            try {
+                [Console]::OutputEncoding = New-Object System.Text.UTF8Encoding($false)
+                $json = & $launcher --print-runtime-command --module $Module
+            } finally {
+                [Console]::OutputEncoding = $previousNativeOutputEncoding
+            }
             if ($LASTEXITCODE) { throw "Installation launcher failed (exit $LASTEXITCODE): $launcher" }
             $command = @((($json -join "`n") | ConvertFrom-Json))
             if ($command.Count -lt 2 -or @($command | Where-Object { $_ -isnot [string] -or -not $_ }).Count) {
@@ -31,7 +44,18 @@ function Get-HermesRuntimeCommand {
             foreach ($name in @('hermes.exe', 'hermes.cmd')) {
                 $legacy = Join-Path $directory $name
                 if (-not (Test-Path -LiteralPath $legacy -PathType Leaf)) { continue }
-                $version = (& $legacy --version 2>$null) -join "`n"
+                # The "Install directory:" line is UTF-8 (hermes_bootstrap
+                # reconfigures the CLI's stdio on import); PS 5.1 decodes
+                # captured native stdout with the console OEM code page, so a
+                # profile path like C:\Users\Balázs arrives mojibaked and the
+                # GetFullPath comparison below never matches (#124526).
+                $previousNativeOutputEncoding = [Console]::OutputEncoding
+                try {
+                    [Console]::OutputEncoding = New-Object System.Text.UTF8Encoding($false)
+                    $version = (& $legacy --version 2>$null) -join "`n"
+                } finally {
+                    [Console]::OutputEncoding = $previousNativeOutputEncoding
+                }
                 if ($LASTEXITCODE -or $version -notmatch '(?m)^Install directory: (.+)\r?$') { continue }
                 $reported = [IO.Path]::GetFullPath($Matches[1].Trim()).TrimEnd('\', '/')
                 $expected = [IO.Path]::GetFullPath($InstallRoot).TrimEnd('\', '/')
diff --git a/scripts/install.ps1 b/scripts/install.ps1
index c389d57f24..ba1ea26a6c 100644
--- a/scripts/install.ps1
+++ b/scripts/install.ps1
@@ -330,6 +330,26 @@ function Initialize-ResolvedPaths {
     } else {
         Join-Path $resolvedHome 'hermes-agent'
     }
+    # A HermesHome equal to or inside InstallDir puts the pm tool store
+    # (<home>\tools) inside the checkout: the repository stage's
+    # occupied-directory preflight then refuses every retry after the first
+    # run populated it, and `git stash --include-untracked` would sweep the
+    # toolchain into the stash. Refuse before anything downloads (#124526)
+    # unless HERMES_RUNTIME_DIR parks the store outside the checkout.
+    $cmpHome = "$resolvedHome".TrimEnd('\', '/')
+    $cmpDir = "$resolvedDir".TrimEnd('\', '/')
+    $dirPrefix = $cmpDir + [IO.Path]::DirectorySeparatorChar
+    $storeInside = $cmpHome -eq $cmpDir -or
+        $cmpHome.StartsWith($dirPrefix, [StringComparison]::OrdinalIgnoreCase)
+    if (-not $storeInside -and $env:HERMES_RUNTIME_DIR) {
+        # The override owns the store; only it decides where that lands.
+        $cmpStore = "$env:HERMES_RUNTIME_DIR".TrimEnd('\', '/')
+        $storeInside = $cmpStore -eq $cmpDir -or
+            $cmpStore.StartsWith($dirPrefix, [StringComparison]::OrdinalIgnoreCase)
+    }
+    if ($storeInside) {
+        Fail "HermesHome ($resolvedHome) cannot be the install directory or live inside it ($resolvedDir): the tool store would land inside the checkout. Use a separate -HermesHome, or point HERMES_RUNTIME_DIR outside -InstallDir."
+    }
     # The param() variables live in the CALLER's scope, which is the script
     # scope only under -File. Under the documented
     # `& ([scriptblock]::Create((irm ...)))` install they live in the
diff --git a/scripts/tests/test-install-ps1-store-guard.ps1 b/scripts/tests/test-install-ps1-store-guard.ps1
new file mode 100644
index 0000000000..fdfa2e596a
--- /dev/null
+++ b/scripts/tests/test-install-ps1-store-guard.ps1
@@ -0,0 +1,158 @@
+# Tests for install.ps1's HermesHome/InstallDir separation guard (#124526).
+#
+# Run from a PowerShell prompt:
+#
+#   pwsh -NoProfile -ExecutionPolicy Bypass -File scripts/tests/test-install-ps1-store-guard.ps1
+#
+# Background: passing -HermesHome and -InstallDir as the same path (or a
+# HermesHome nested inside -InstallDir) makes the pm tool store land at
+# <InstallDir>\tools, INSIDE the checkout. Two failures follow: the
+# repository stage's occupied-directory preflight refuses every retry after
+# the first run populated the folder ("exists and is not a Hermes git
+# checkout"), and `git stash --include-untracked` would sweep the toolchain
+# into the stash. The installer now refuses the combination up front, before
+# any download, unless HERMES_RUNTIME_DIR parks the store elsewhere.
+#
+# HOW THIS RUNS THE CODE: by executing install.ps1 as a real subprocess with
+# crafted -HermesHome / -InstallDir arguments. -ShowResolvedPaths is a
+# side-effect-free early exit that runs AFTER Initialize-ResolvedPaths, so
+# the guard executes exactly as during an install. The refusal is a `throw`,
+# which under -File exits the child non-zero before the JSON is printed; the
+# accepted configurations print the resolved-path JSON with the requested
+# paths intact. Nothing here parses install.ps1's source (AGENTS.md bans
+# source-reading tests: they pass on broken code and fail on correct
+# refactors).
+
+$ErrorActionPreference = "Stop"
+$repoRoot = Split-Path -Parent (Split-Path -Parent (Split-Path -Parent $MyInvocation.MyCommand.Path))
+$installScript = Join-Path $repoRoot "scripts/install.ps1"
+
+if (-not (Test-Path $installScript)) {
+    throw "Could not locate install.ps1 at $installScript"
+}
+
+$failures = 0
+
+function Assert-True {
+    param([bool]$Condition, [Parameter(Mandatory = $true)][string]$Label)
+    if (-not $Condition) {
+        Write-Host "FAIL: $Label" -ForegroundColor Red
+        $script:failures++
+    } else {
+        Write-Host "OK: $Label" -ForegroundColor Green
+    }
+}
+
+# Run install.ps1 -ShowResolvedPaths with explicit -HermesHome/-InstallDir and
+# capture (exit code, stdout, stderr). The call operator, not Start-Process:
+# `&` inherits this process's environment on every host, and stderr is merged
+# so Windows PowerShell 5.1's NativeCommandError records cannot fail the lane.
+function Invoke-ResolvedPaths {
+    param([string[]]$ExtraArgs = @())
+
+    $psExe = (Get-Process -Id $PID).Path
+    $outFile = [System.IO.Path]::GetTempFileName()
+    $savedRuntimeDir = [Environment]::GetEnvironmentVariable('HERMES_RUNTIME_DIR')
+    $savedHermesHome = [Environment]::GetEnvironmentVariable('HERMES_HOME')
+    try {
+        if ($null -eq $savedRuntimeDir) {
+            Remove-Item Env:HERMES_RUNTIME_DIR -ErrorAction SilentlyContinue
+        } else {
+            $env:HERMES_RUNTIME_DIR = $savedRuntimeDir
+        }
+        if ($null -eq $savedHermesHome) {
+            Remove-Item Env:HERMES_HOME -ErrorAction SilentlyContinue
+        } else {
+            $env:HERMES_HOME = $savedHermesHome
+        }
+        $callArgs = @('-NoProfile', '-ExecutionPolicy', 'Bypass', '-File', $installScript) + $ExtraArgs + @('-ShowResolvedPaths')
+        $prevEAP = $ErrorActionPreference
+        $ErrorActionPreference = 'Continue'
+        $global:LASTEXITCODE = 0
+        try {
+            & $psExe @callArgs *> $outFile
+        } finally {
+            $ErrorActionPreference = $prevEAP
+        }
+        $exitCode = $LASTEXITCODE
+        $raw = @(Get-Content -LiteralPath $outFile -ErrorAction SilentlyContinue)
+        $stdout = ($raw | Where-Object { $_ -notlike '`[hermes`]*' }) -join "`n"
+        $stderr = ($raw | Where-Object { $_ -like '`[hermes`]*' -or $_ -match 'HermesHome|install directory|tool store' }) -join "`n"
+        return @{ ExitCode = $exitCode; Stdout = $stdout; All = ($raw -join "`n") }
+    } finally {
+        if ($null -eq $savedRuntimeDir) {
+            Remove-Item Env:HERMES_RUNTIME_DIR -ErrorAction SilentlyContinue
+        } else {
+            $env:HERMES_RUNTIME_DIR = $savedRuntimeDir
+        }
+        if ($null -eq $savedHermesHome) {
+            Remove-Item Env:HERMES_HOME -ErrorAction SilentlyContinue
+        } else {
+            $env:HERMES_HOME = $savedHermesHome
+        }
+        Remove-Item -LiteralPath $outFile -Force -ErrorAction SilentlyContinue
+    }
+}
+
+$base = Join-Path ([System.IO.Path]::GetTempPath()) ("hermes-store-guard-" + [guid]::NewGuid())
+$home1 = Join-Path $base 'home1'
+$dir1 = Join-Path $base 'checkout1'
+$insideHome = Join-Path $base 'checkout2'      # HermesHome nested inside InstallDir
+$insideDir = Join-Path $base 'checkout2'       # the InstallDir that contains it
+
+try {
+    # 1. Same path for both: refused, before any download.
+    $r = Invoke-ResolvedPaths @('-HermesHome', $home1, '-InstallDir', $home1)
+    Assert-True ($r.ExitCode -ne 0) 'same HermesHome and InstallDir is refused (non-zero exit)'
+    Assert-True ($r.All -match 'tool store would land inside the checkout') 'refusal names the tool-store cause'
+
+    # 2. HermesHome nested inside InstallDir: refused for the same reason.
+    $r = Invoke-ResolvedPaths @('-HermesHome', $insideHome, '-InstallDir', $insideDir)
+    Assert-True ($r.ExitCode -ne 0) 'HermesHome inside InstallDir is refused (non-zero exit)'
+
+    # 3. Distinct paths: accepted, and the caller's paths survive verbatim.
+    $r = Invoke-ResolvedPaths @('-HermesHome', $home1, '-InstallDir', $dir1)
+    Assert-True ($r.ExitCode -eq 0) "distinct paths are accepted (exit $($r.ExitCode))"
+    $paths = $null
+    try { $paths = $r.Stdout | ConvertFrom-Json } catch { $paths = $null }
+    Assert-True ($null -ne $paths) 'accepted run prints the resolved-path JSON'
+    if ($paths) {
+        Assert-True ("$($paths.hermes_home)" -eq $home1) 'hermes_home echoes the requested -HermesHome'
+        Assert-True ("$($paths.install_dir)" -eq $dir1) 'install_dir echoes the requested -InstallDir'
+    }
+
+    # 4. HERMES_RUNTIME_DIR outside the checkout lifts the refusal: the store
+    #    no longer lands inside InstallDir, so the configuration is legitimate.
+    $storeElsewhere = Join-Path $base 'store'
+    $saved = $env:HERMES_RUNTIME_DIR
+    try {
+        $env:HERMES_RUNTIME_DIR = $storeElsewhere
+        $r = Invoke-ResolvedPaths @('-HermesHome', $home1, '-InstallDir', $home1)
+        Assert-True ($r.ExitCode -eq 0) "HERMES_RUNTIME_DIR outside lifts the refusal (exit $($r.ExitCode))"
+    } finally {
+        if ($null -eq $saved) {
+            Remove-Item Env:HERMES_RUNTIME_DIR -ErrorAction SilentlyContinue
+        } else {
+            $env:HERMES_RUNTIME_DIR = $saved
+        }
+    }
+
+    # 5. Default derivation never trips the guard: InstallDir defaults to
+    #    <HermesHome>\hermes-agent, which is a child, not a parent.
+    $r = Invoke-ResolvedPaths @('-HermesHome', $home1)
+    Assert-True ($r.ExitCode -eq 0) "default -InstallDir under -HermesHome stays accepted (exit $($r.ExitCode))"
+    $paths = $null
+    try { $paths = $r.Stdout | ConvertFrom-Json } catch { $paths = $null }
+    if ($paths) {
+        Assert-True ("$($paths.install_dir)" -eq (Join-Path $home1 'hermes-agent')) 'default install_dir derives under hermes_home'
+    }
+} finally {
+    Remove-Item -LiteralPath $base -Recurse -Force -ErrorAction SilentlyContinue
+}
+
+if ($failures -gt 0) {
+    Write-Host "$failures assertion(s) failed." -ForegroundColor Red
+    exit 1
+}
+Write-Host 'HermesHome/InstallDir separation guard tests passed.' -ForegroundColor Green
+exit 0
diff --git a/tests/scripts/desktop_update/test_desktop_update_runtime_unicode.py b/tests/scripts/desktop_update/test_desktop_update_runtime_unicode.py
new file mode 100644
index 0000000000..92b8ba20ef
--- /dev/null
+++ b/tests/scripts/desktop_update/test_desktop_update_runtime_unicode.py
@@ -0,0 +1,131 @@
+"""runtime.ps1 must decode the launcher's UTF-8 path output on Windows (#124526).
+
+``scripts/desktop-update/runtime.ps1`` captures two machine-readable outputs from
+Hermes launchers: ``--print-runtime-command`` (a JSON array whose first element
+is the interpreter path) and ``--version`` (whose ``Install directory:`` line
+names the source root). Both can sit under a non-ASCII profile
+(``C:\\Users\\Balázs``). The launchers print UTF-8 — the real CLI's
+``hermes_bootstrap`` reconfigures stdio on import — while Windows PowerShell 5.1
+decodes captured native stdout with the console OEM code page, mojibaking the
+path (``á`` → ``├í``, ``ł`` → ``┼é``) so the returned command cannot run and the
+legacy identity check never matches.
+
+Both call sites now scope ``[Console]::OutputEncoding`` to UTF-8 around the
+capture and restore it. These tests drive the REAL script against a REAL
+published launcher under non-ASCII paths, across three console code pages, and
+assert the caller's encoding is restored. They never read the script's text.
+"""
+
+from __future__ import annotations
+
+import json
+import os
+from pathlib import Path
+import subprocess
+import sys
+
+import pytest
+
+from tests.installation_launcher_fixture import publish_fixture_launcher
+
+ROOT = Path(__file__).resolve().parents[3]
+HELPER = str(ROOT / 'scripts/desktop-update/runtime.ps1').replace("'", "''")
+
+# Mirrors the production launchers: hermes_bootstrap reconfigures stdio to
+# UTF-8 on import before the entry module runs, so both outputs carry raw
+# UTF-8 bytes on a pipe. sys.reconfigure replicates that for the fixture's
+# plain interpreter (the embedded bootstrap imports the real one).
+CLI = """
+import io, json, os, sys
+for _stream in (sys.stdout, sys.stderr):
+    if isinstance(_stream, io.TextIOWrapper):
+        try: _stream.reconfigure(encoding='utf-8', errors='replace')
+        except (OSError, ValueError): pass
+from pathlib import Path
+def main():
+    if '--version' in sys.argv:
+        print('Install directory: ' + str(Path(__file__).resolve().parents[1])); return 0
+    print(json.dumps([sys.executable] + sys.argv[2:]))
+    return 0
+if __name__ == '__main__':
+    sys.exit(main())
+"""
+
+# From #124526 / #128326: profile names that die as OEM mojibake.
+PROFILE = 'Balázs Paweł Ñuñez'
+
+
+def _run_helper(script: str, home: Path, env_extra: dict[str, str]) -> subprocess.CompletedProcess:
+    return subprocess.run(['powershell', '-NoProfile', '-Command', script],
+                          env={**os.environ, 'HERMES_HOME': str(home), **env_extra},
+                          capture_output=True, text=True, timeout=120)
+
+
+@pytest.mark.platforms('windows')
+@pytest.mark.parametrize('code_page', [936, 437, 65001])
+def test_runtime_command_survives_a_non_ascii_profile_path(tmp_path: Path, code_page: int) -> None:
+    """Get-HermesRuntimeCommand returns the launcher's exact interpreter path.
+
+    The launcher JSON is ASCII-escaped today, so this is the round-trip
+    contract for the boundary every other consumer (hermes_cli.windows_ssh_
+    runtime, the Electron updater, the Rust bootstrap) already decodes as
+    UTF-8: the scoped capture must return the path byte-exact and restore
+    the caller's console encoding, whatever code page the console carries.
+    """
+    profile = tmp_path / PROFILE
+    install = profile / 'hermes-agent'
+    # PM's store under the same non-ASCII profile, with a facts.json naming a
+    # store interpreter there — the layout a real install resolves and prints.
+    store = profile / 'tools'
+    python_dir = store / 'cpython-3.14-windows-x86_64-none'
+    python_dir.mkdir(parents=True)
+    python = python_dir / 'python.exe'
+    python.write_bytes(Path(sys.executable).read_bytes())
+    (store / 'facts.json').write_text(
+        json.dumps({'packages': {'python': {'entry': python_dir.name}}}), encoding='utf-8')
+    publish_fixture_launcher(install, CLI)
+    home = tmp_path / 'home'
+    home.mkdir()
+    target = str(install).replace("'", "''")
+    prefix = f"[Console]::OutputEncoding = [Text.Encoding]::GetEncoding({code_page}); "
+    script = (prefix + f". '{HELPER}'; "
+              f"$c = @(Get-HermesRuntimeCommand -InstallRoot '{target}'); "
+              f"$c[0]; [Console]::OutputEncoding.CodePage")
+    result = _run_helper(script, home, {'HERMES_RUNTIME_DIR': str(store)})
+    assert result.returncode == 0, result.stdout + result.stderr
+    lines = result.stdout.strip().splitlines()
+    assert lines[0] == str(python), (
+        f"interpreter path was mojibaked under code page {code_page}: {lines[0]!r}")
+    assert int(lines[1]) == code_page, 'the capture must restore the caller console encoding'
+
+
+@pytest.mark.platforms('windows')
+@pytest.mark.parametrize('code_page', [936, 437, 65001])
+def test_legacy_version_identity_check_matches_a_non_ascii_install(tmp_path: Path, code_page: int) -> None:
+    """The user-bin fallback resolves by reported install directory, not PATH order.
+
+    Red on base: the fixture CLI prints ``Install directory:`` as UTF-8 (the
+    production CLI reconfigures stdio the same way), and Windows PowerShell
+    5.1 decodes that capture with the console OEM code page — so under CP437
+    a profile like ``Paweł Łącki`` reports mojibaked and the identity check's
+    GetFullPath comparison never matches (#124526).
+    """
+    install = tmp_path / PROFILE / 'hermes-agent'
+    launcher = publish_fixture_launcher(install, CLI)
+    # Earlier PM installers published only to user-bin: move (not copy) the
+    # launcher out of .hermes\bin so Get-HermesRuntimeCommand takes the
+    # legacy branch. Its body still reports the checkout it was minted from.
+    home = tmp_path / 'profile'
+    userbin = home / 'bin'
+    userbin.mkdir(parents=True)
+    external = userbin / launcher.name
+    launcher.rename(external)
+    target = str(install).replace("'", "''")
+    prefix = f"[Console]::OutputEncoding = [Text.Encoding]::GetEncoding({code_page}); "
+    script = (prefix + f". '{HELPER}'; "
+              f"try {{ @(Get-HermesRuntimeCommand -InstallRoot '{target}') | ConvertTo-Json -Compress }} "
+              f"catch {{ exit 1 }}")
+    result = _run_helper(script, home, {})
+    assert result.returncode == 0, result.stdout + result.stderr
+    assert json.loads(result.stdout)[0] == str(external), (
+        f"legacy identity check lost the non-ASCII path under code page {code_page}")