I'm a heavy Terminal user and I realize that Apple doesn't really care about it because 99,9% of their users don't even know what to do with it, Terminal only exists because Mac OS X is UNIX and it just has to be there. Having said that I still can't quite understand why if it sucks so much I replaced my fine iTerm in favor of Apple's solution despite 2 serious issues. Well that's no longer the case thanks to Ciarán Walsh and his SIMBL plugins to fix the colors and the tab switching!
Please go ahead and follow his instructions:
Unfortunately I'm broke right now, but I'll send you a donation (hopefully for beer) as soon as I can.