in /etc/X11/fvwm2/system.fvwm2rc, search for "color_xterm" and replace with "color-xterm" (2.0.46-11) [!!!reported for RH 5.0!!!]
I could not find any reference to color_xterm in the /etc/X11/fvwm2/system.fvwm2rc file. All menu entries for color xterms are working properly.
Yup, goofed again: my mistake, I read my old 5.0 config file instead of the new one from 5.2, where yes everything works fine with regards to xterm. another "bug" closed.