Actually, instead of halting the script with an error, it could just UTF-8 encode codepoints 256+. This would still break older scripts but it would allow newer scripts to use Unicode characters if they wished.
As long as the IV/Salts can only be input as a text string, the current behavior of not UTF8 encoding codepoints 128-255 is good, because the alternative is to greatly reduce the number of possible salts. Allowing salts shorter than 8 also increases the number of possible salts, since that's the only way to get 0x00 into the salt. If using $chr(10004) were another way of using $chr(226) $+ $chr(156) $+ $chr(148) that would be better than silently changing all 256+'s into codepoint 63's, as long as someone's use of $chr(10004) didn't cause it to silently ignore 2 other characters of the salt.
As for breaking older scripts, they could still decode their messages by changing those characters into questionmark 63's.
Unless it needs to maintain compatibility with something else that does so, I don't think it's a good idea to silently ignore portions of the key/salt/IV parameters because they're too long. If it's longer than a valid encryption parameter, then it can't be a valid parameter. The switch combos not using the 'l' literal use the key parameter as input to an MD5 hashing, and it seems reasonable that a string of any length should be valid as input to a hash digest. So far, the only example I can find describing the key being hashed the same way $encode hashes non-literal keys is from the Crypt::CBC package, and I showed a link where it accepted MD5 input longer than 56 bytes, then use the output of the recursive hashing to make a 56 byte key out of it.
I guess a 'chop me' switch could be confusing if it makes the user think their 16 byte Salt or 80-byte literal key would not be chopped in the absence of that switch. I was thinking of it being more for the edge case of forcing too-long keys to be used in a valid manner, including the current handling of a UTF encoded character that's split across both sides of the 56 border.