Weird cursors behaviour when using vim in terminal in insert mode

Hi all.
I have an issue using vim in the termninal.
Every time I go to Indert mode and try to sue the cursor it just
begging to write the letter A,B,C,D and creates a new line.
I have been digging and seems it is because of the internal definition
of the termcap in Vim.
So I tried the next:
set term=builtin_ansi

But then it is messing up the colors.
The term is xterm-256color by default.
Is there ane way to get the cursors working properly without changing
the termn, or using the xterm terminal?
I forgot to say I am using latest vim 7.3.

Thanks



--
Un saludo
Best Regards
Pablo Giménez

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