Haha, perhaps I shouldn't have edited my original post so much.
Basically, the funky text control is driving me crazy in two ways:
It makes it an awful chore to do the same command many times with just one or two different parameters. Heaven forbid I want to delete/overwrite an entire pathname! I'm sure there's a historical reason for this (maybe even a good one), but all I really want is the flexibility of a normal text field — put the text into that field, hit return, and have it execute that text. The only thing I can imagine losing with this functionality is that retro feel, and really, I can live without that! (Again, I'm sure there are reasons, but I don't think they could possibly apply to me.)
I've tolerated that funkiness in the past because the "option-click to position cursor" feature (in Terminal > Window Settings > Emulation) at least gave me some flexibility. (I assume this is what you're talking about, MisterMe.) But that won't even work consistently. Sometimes it works as expected, but sometimes it just beeps and changes my entire command entry to the last successful command I entered (similar to pressing the up arrow). I have no idea why. It generally happens after I paste in a command and try to change a few flags. However, even if I could get that working normally, it's gotten to the point where I'm using Terminal too much to accept such a half-baked solution anyway.
I actually have started writing complete commands in BBEdit, then copying and pasting them into Terminal, as has been suggested. This is obviously a pain in the neck, though. It also forces me to give up Terminal's most useful text-entry feature: dragging files from the Finder to insert lists of properly-escaped file paths into the command line.
Edit: Actually, I missed it in my first look, but iTerm has an optional Cocoa text field in its toolbar that lets you enter commands for execution. Unfortunately, it does not accept dropped files properly, and it's very small. It'll be good to have it in my toolbox, but I'm still hoping for something better.