The -r flag should take care of it from local->s3, but maybe by "folders" you mean you are creating S3 nodes. s3sync doesn't parse the folder syntax used by other tools, so if you use them to make your folders on s3 then my tool won't understand them properly.
iconv is the ruby library that converts character sets between utf8 and your local. It apparently doesn't approve of that jpg's file name. I'm by no means an expert in character encoding; in fact you might say it's my nemesis But that's what the error means at least.