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1b1ed1a
(Get the code!)
This problem still exists on natty.
IMHO XON/XOFF flow control should be disabled by default. It is a historical relic from times when serial terminals were used. Some terminals were so slow that their input buffer would overflow without flow control, thus the terminals could be configured to send XON/XOFF to the OS to temporarily stop the flow of characters while the display or printer was rendering characters. Better terminals and modems supported hardware flow control signals on the RS-232 serial line, but all of them did not, and some times the flow control pins were not connected.
How many uses slow serial terminals these days? I think the people who use them know how to enable XON/XOFF. For pretty much anyone else this is just a nuisance.