Gnome-terminal fails to set echok mode in its stty settings
(check with 'stty -a'). In a shell or other environment that
doesn't do its own command-line editing, this means that
typing some control characters looks (but does not act like)
they had no effect, such as your line-kill character.
Environment: gnome-terminal being started from inside an
xterm (with echok set).
Upstream maintainer (Michael Zucchi (firstname.lastname@example.org)) claims that
this setting is a matter of opinion and he doesn't think it should be set.