export TERM=linuxIt works for Terminal, it works when I'm ssh'ed into Linux, it works when I'm ssh'ed into FreeBSD, it works in Postgres psql. It just works. Finally a solution.
Edit your .bash_profile and add the above command, and it will stick whenever you need it.
[robg adds: I haven't tested this one beyond making sure that it didn't break anything. Terminal seems to work fairly well for me in VT100 mode, set via the Terminal -> Preferences dialog.]

