Developed a WORKAROUND today :-)
Choose File > New > New Window
Resize the Window so that the window covers the existing Xcode window, BUT leave the existing
xCode windows "All Output" showing underneath.
Click into new (upper/covering ) "All Output" window to put the keyboard focus in the upper window.
Run your application. Upper/covering window will show only first input character per line, but
lower window's "All Output" section will show all characters as they are typed in.
See a picture of this at:
https://sites.google.com/site/chrislent/home/-workaround-xcode-4-5-output-window -input-echo-problem
I filed a bug report on this, with the workaround included:
Problem ID: 12383367
Title: Console Input to "All Output" window echoes only first character of each line
Originated Date: 26-Sep-2012 11:03 PM (EDT)