> if [ ! "$DISPLAY" = ":0" ] ; then
>         stty erase ^H
>         TERM=XTerm
>         export TERM
> fi
>

Your getting a little confused,  the terminal type is xterm (lowercase)

The program called xterm (which does "xterm" emultation ) looks at
/usr/lib/X11/app-defaults/XTerm for its defaults


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