Thank you for this bug report. I believe that the terminal accessed by
Application->accessories->terminal is hard coded to be the gnome-
terminal. I believe the problem is setting xterm as default in the
preferred applications doesn't change this fact. I believe therefore
the solution to your problem is you need
Application->accessories->terminal to be whatever your preferred
terminal is and not just be hard coded to always be the gnome-terminal.
** Changed in: xterm (Ubuntu)
Status: New => Confirmed
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default terminal does not have an effect
https://bugs.launchpad.net/bugs/390372
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