This issue has to be reviewed by core devs, it is not the url encoding itself that creates the problem in the first place, but the fact that in Osclass / has a special meaning for separation of the search parameters combined with the security feature of Apache. If you disable that security within config directive in Apache, you end up with another problem: apparently Osclass does not know where the search pattern begins and where the next block starts, so it gets reset and you end up with all results. I have tried to change few things, still not working. The easiest way would be to simply strip any slash from the search input, not ideal but best I can think of.
Regards