No, it appears to have gone away.  I just did some more experimenting
and found an easy way to reproduce it in 7.10:

1) boot from CD (to get a fresh installation of 7.10)
2) add System Monitor to panel, in order to be able to see the 100% use of one 
CPU
3) open a Terminal (Accessories->Terminal)
4) in the Terminal window, type:  set -o vi <Enter>
4) hit F3
5) watch the System Monitor to see that one CPU has just been maxed at 100%
6) hit Ctrl-C to return bash to normal behavior
7) notice that the System Monitor shows that usage has dropped back down

I booted from 8.04 and 8.10 and was not able to reproduce it with these
same instructions, so it looks like it's gone away.  Maybe it's worth
reporting upstream to bash or fixing in 7.10?

-- 
F3 in bash running under gnome-terminal causes loop
https://bugs.launchpad.net/bugs/188245
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