Nope neither helps. I almost give up. Thank you anyway for the help.
I am glad you gave up now... for I must be off. I will mess with it later. I am on the crappiest machine I have access to atm and am not going to telnet home from this crappy xp machine.
It produces ~ even in Terminal on OSX Tiger! Must be one of the dogmas related to early days of unix ;)
Take a look at /etc/ssh2/ssh2_config or ~/.ssh2/ssh2_config report anything obvious here :) -- specifically SSH2_TTY
It seems delete is being "escaped" with ~ (which is the default escape character for ssh) -- what a great help that was ;).