with the newer XFree86 xterm terminfo settings, gnome-terminal is often screwing up, and going into inverse video mode, when fullscreen applications are used (emacs, less, etc.). Also, the keysyms for gnome-terminal such as home and end match the linux console, NOT xterm. So it really shouldn't be setting TERM=xterm at all unless this is corrected.
Fixed this problem, looking into other control codes that zvt doesn't handle correctly from new xterm ncurses entry.