Try removing your .nanorc and .inputrc files.
Thanks for the suggestion, but unfortunately it didn't help.
I should probably point out that I'm using the Mac OS X (10.4) terminal. However, I have three other Linux boxes at work, all with different distributions, and I have no problem with backspacing in nano while logged in to them. Only on the DreamHost server is backspace interpreted as forward-delete in nano. (However, as I said, pico and bash itself don't have this problem.)
There is only a /root/.inputrc which contains:-
There's an entry in that file that looks like this:
This indicates that Control-Left is mapped to backward-word, and I can confirm this in bash by typing Control-V then Control-Left. I get:
However, if I type Control-Left directly, I see only this:
Does that mean anything?