The problem is a combination of the older version of nano + xterm-256color + Terminal.
The older version of nano does some odd things when moving the cursor left and right: if the cursor is one column to the left of a tab stop, moving the cursor one column to the right sends a tab (Control-I) character, and if it's one column to the right of a tab stop, moving the cursor one column to the left sends a "back tab" (ESC [ Z) sequence. I say "odd" because it's odd that it bothers using these sequences when next to tab stops instead of moving the cursor left/right in the same manner as it does when it's farther away from a tab stop.
The reason this is a problem is that Terminal doesn't support the "back tab" escape sequence. So, nano thinks it moved the cursor to the left one column, but Terminal hasn't moved it, and further editing and cursor movement on that line is out of synch with what's displayed in the terminal and it gets progressively more confusing looking. And since it only occurs when moving one character to the left to a tab stop, the user-observable behavior can seem even more surprising and unpredictable.
Now, it only uses "back tab" if the terminfo file says that the terminal supports it. It does this with a "cbt" entry. You can see this with the "infocmp xterm-256color" command, which shows "cbt=\E[Z". This code is supported by modern Xterm and is found in several variations of the xterm terminfo entry, but xterm-color represents an older branch of Xterm and does not include "cbt". So, switching to xterm-color gives you something roughly similar to xterm and xterm-256color, except without "cbt" (and some important behaviors like Background Color Erase and 256 colors) and so this older version of nano behaves better in combination with xterm-color and Terminal.
So, you can work around the problem by setting the TERM environment variable to xterm-color (or, really, any terminfo value that doesn't include "cbt" and is reasonably compatible with Terminal), or by upgrading the older nano on the remote host to a newer version that doesn't have this somewhat odd cursor movement behavior. You could also create a custom terminfo file that's a copy of xterm-256color with cbt removed (assuming you're comfortable creating and editing custom terminfo files).
The easiest way for users to set the TERM value is with the popup menu in Terminal > Preferences > Settings > [profile] > Advanced > Declare terminal as. However, that sets it for every program used with that profile. I recommend one of two approaches:
1. Duplicate (in the "action" menu below the profiles list) the profile you want to use with the remote host and set the "Declare terminal as" value (which just sets the TERM environment variable), then always use that profile for terminals that you use to ssh to CentOS machines. In fact, if you only have one or two remote hosts for which this is a problem, you could customize "… > Settings > Shell > Startup > Run command" to include the "ssh …" command, which will connect to the remote host automatically when you create a new terminal with that profile. Then create a similar custom profile for each remote host.
2. Invoke nano with something like "TERM=xterm-color nano" to set the terminfo value only when running the older version of nano. You could even turn this into an alias, e.g., "alias nano='TERM=xterm-color nano'". If you only have one remote host (or you don't mind doing this on mulitple hosts), customise the appropriate shell startup script to do this so it only does this when invoking nano on that host. Or just remember to "export TERM=xterm-color" after you login to the remote host.
As always, this forum is not an official means to provide feedback to Apple. If this issue is important to you, please file a bug report either at <http://www.apple.com/feedback/macosx.html> (set Feedback Area to Applications/Utilities) or <http://developer.apple.com/bugreporter/> (requires registering for a free developer account). Apple uses reports like these to prioritize work and to decide what's important to put in system updates.
