I have tried your code "stty erase ^H" in .bash_profile and as I thinked it works for standard bash shell and xterm BUT NOT for RXVT in which, now, BKSPACE is dead. In others words RXVT wants "stty erase ^?" as in /etc/profile.
WFM with rxvt and xterm, both with or without X, and with cmd.
For me, pressing [ctrl-v][backspace] prints out "^H" in all cases. I've simply removed the "stty erase" call from /etc/profile and everything's working fine.
I should note that I'm running the latest snapshot, though.
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