I’m working on setting up a new (old) MacBook Pro this evening when I came
across an oddity. Colors in iTerm2 were working, but not in
xterm-256color mode. Both laptops are sitting on the table next to each
other, so I started debugging.
There’s all manner of bugs that have been reported, but no amount of tweaking my environment variables worked. Some time during the process, Xcode 3 finished installing and all of the sudden things started working.
My guess is that Xcode ships with X11 which is needed for
work, although I’m not planning on uninstalling just to see if it works. At
any rate, if you’re having issues with 256-color mode in iTerm2, check to make
sure you have Xcode installed.