[OS X TeX] novice query concerning international characters

[Dr. Clea F. Rees]

Almost everything I do with TeX I do in English so I am a complete
novice when it comes to typesetting other languages. A rather stuck
complete novice, in fact.

Using: TL 2008, TeXShop
Document is saved with UTF-8 encoding and the first line of the file is
 	%!TEX encoding = UTF-8 Unicode
My preample includes:
 	\documentclass[11pt,welsh]{cfr}
 	\usepackage[utf8]{inputenc}
 	\usepackage[T1]{fontenc}
 	\usepackage{textcomp,cfr-lm}
The class cfr is basically calling article in this case. It also loads
babel. The babel support files for welsh are being loaded. cfr-lm is
essentially lm for these purposes. Using
 	\documentclass[11pt,welsh]{article}
 	\usepackage{babel}
 	\usepackage[utf8]{inputenc}
with or without
 	\usepackage{lmodern}
produces the same results.

I use the Welsh keyboard for input which makes it easy to type
characters with circumflexes. That is, the 7 vowels: a, e, i, o, u, w,
y. But using a different keyboard (e.g. US) produces the same results.

Things work fine for a, e, i and u. Not so fine for the others. w and y
are not typeset at all if typed with a circumflex. (Presumbably because
OT1, T1 are missing slots for w and y circumflex.) I also get console 
errors about o circumflex and I'm not sure why:
 	! Package inputenc Error: Keyboard character used is undefined
 	(inputenc)                in inputencoding `utf8'.
 	See the inputenc package documentation for explanation.
The output looks fine for o with a circumflex, but every occurrence
triggers this error.

In the past, I've just used e.g. \^o (or whatever - I don't do it often
enough to actually remember) but I thought I would try getting this to
work as I may be typesetting just a tad more Welsh for a little.

I've looked at the documentation for babel, ucs, inputenc and utf8ienc
but don't really know where to start.

Any pointers (for o, w and/or y - or generally) would be greatly 
appreciated. I don't really want to use XeLaTeX for this unless I have
to.

Thanks,
cfr