What version is this on?

If it's on the beta, note that the 7.x beta no longer supports non-Unicode encodings such as the cp1251 codepage. This is not a bug, this is intentional and described on http://mirc.com/beta.html

Note that as shown in your second screenshot, you can change your encoding on the server to no longer use cp1251. Instead use UTF-8. Apparently this can be done by connecting to the server on another port (you can look up more appropriate details). This would solve your issue.