I'm having the same trouble on Ubuntu 12.02 server. I login from a windows PC with Putty. One one account everything is fine, the arrow keys and history work Ok. However, on another account on same server, the arrow keys work as described here.
Both accounts show as being bash shells and there is no difference between the .login and .bashrc files for both users.
Any ideas what the issue is here
Update: the problem was really as Jim Thorton posted, I changed the shell type in /etc/passwd with a 'chsh' command now it it works fine.
Last edited by thegerm; 10-23-2012 at 02:23 AM.