I don't think that Reader "improperly" escapes the tilde character - it is true, it gets escaped, but that's a perfectly valid operation, and your browser should be able to handle that. I just tested it, and I don't see any problems with the escaped tilde (it gets converted to %07E). It is actually recommended that a tilde character in a URL does get escaped: http://www.blooberry.com/indexdot/htm...
So, if you see a problem with an encoded tilde, it's not the encoding that is the problem, it's either your browser or your web server.