Terminal $EDITOR: vim normal mode can't be used due to emacs keybinding.

I am having an issue using terminal with EDITOR set to vim that occurs in 10.6 or 10.7. The environment variable is properly configured in ~/.profile.

On 10.5, the <ESC> key will exit insert mode, allowing the user to edit a terminal command in vim's normal mode; for instance, <b> can be used to jump backwards one word, and can be entered any number of times until insert mode is re-entered. However, after upgrading to 10.6 and 10.7, the following would occur: one instance of <ESC> produces a modal shift, and emacs command keys can be entered (<ESC-b> will move back one word). Somehow the keyboard recognizes only the emacs keybinding, not allowing me to enter a different vim mode on the command line.

Vim works normally otherwise. I run most everything from the command line---hence this is very frustrating. Please help me if you know how to remove the emacs keybindings from the <ESC> key so that I can use vim in a terminal.

Cheers