I found this works much better than Zterm:
http://www.macosxhints.com/article.php?story=20061109133825654
I added baud rate set in my applescript so it looks like this now:
tell application "Terminal"
do script with command "screen -U /dev/tty.KeySerial1 38400"
set number of rows of window 1 to 100
set number of columns of window 1 to 150
set background color of window 1 to "white"
set normal text color of window 1 to "black"
set custom title of window 1 to "keyspan-1"
end tell