The correct setting for TERM is xterm (or rather xterm-256color). This variable is supposed to refer to a terminal behavior description, not to the name of the executable that is a terminal emulator.
Terminator uses the VTE widget for actual terminal emulation, which in turn tries to emulate xterm as closely as reasonable. VTE defaults to xterm-256color nowadays (used to be xterm up until about a year ago), and so does gnome-terminal (the "reference" frontend developed together with VTE). If kupfer (whatever that is) requires the terminal emulator's executable name to be specified in $TERM then it's a bug (a fundamental misunderstanding of this variable) in kupfer and should be fixed there.
