Backspace and Delete keys problem in vim

When I press arrow,backspace,del buttons in text editor, I expect something like "backspace" deletes the character to the left[of the cursor], "delete" deletes the character to the right and "arrow" should move cursor to correct direction in document.

Since I move to Feisty Fawn. I just notice that Backspace and Delete Keys are not act as it should be in VIM editor e.g. ,

In insert mode, the arrow buttons will insert the letters A, B, C, D each followed by a CR.
If I press backspace, the cursor moves back, but the letter doesn't go away.
Also delete button will deletes all letters that on the right of cursor and change case of previous letter.
Below is a pic when I type up, down, right, left, some text, backspace and del

[Some web said] "backspace key" will sent ASCII character 8[decimal] and "delete key" sent 127[decimal] [try man ascii for a list of the ASCII characterset].
The backspace key also has the representation ^H [Ctrl-H][use for open help in some app] and the DEL key has the representation ^[[3~.

First I guess may be it mess between terminal function and character issued when press problem key. Type "stty -a" on will show terminal line settings e.g. functions and it's character.

pnix@pnix-a7n:~$ stty -a
speed 38400 baud; rows 24; columns 80; line = 0;
intr = ^C; quit = ^\; erase = ^?; kill = ^U; eof = ^D; eol = M-^?; eol2 = M-^?;
swtch = M-^?; start = ^Q; stop = ^S; susp = ^Z; rprnt = ^R; werase = ^W;
lnext = ^V; flush = ^O; min = 1; time = 0;
-parenb -parodd cs8 hupcl -cstopb cread -clocal -crtscts
-ignbrk brkint -ignpar -parmrk -inpck -istrip -inlcr -igncr icrnl ixon -ixoff
-iuclc ixany imaxbel iutf8
opost -olcuc -ocrnl onlcr -onocr -onlret -ofill -ofdel nl0 cr0 tab0 bs0 vt0 ff0
isig icanon iexten echo echoe echok -echonl -noflsh -xcase -tostop -echoprt
echoctl echoke
pnix@pnix-a7n:~$ 

For me erase is ^?. Then check terminal emulator settings to see character it sends when we press the backspace and delete keys. At a shell type ^V[backspace] e.g. Ctrl-V then Backspace and you will see either ^H or ^?. Mine backspace is ^? humm..it's not mess may be it vim configuration.

After some search, I found that vim will run in compatibility mode by default. [Compatibility mode means making vim act like the original vi, which you might want if you were used to working in other versions of Unix.]To make vim bahave as I expect, I create a file .vimrc in home directory and put "set nocompatible" in it.

pnix@pnix-a7n:~$ cat>.vimrc<> set nocompatible
> EOF
pnix@pnix-a7n:~$

Now backspace button would would only delete characters to the left of the cursos up to the point where you entered insert mode. So I add "set backspace=2"

pnix@pnix-a7n:~$ echo "set backspace=2">>.vimrc
pnix@pnix-a7n:~$

That's it. All keys now work as I want.

note:
set backspace=2 <==allows for backspace of items not inserted in this "insert session"
set nocompatible <==fix behaviour of Backspace and DEL keys
set smartindent <==umm.. for smart indent:)