Here is a tip for Mac OS X 10.6.x (Snow Leopard) users who use the Terminal application to SSH into remote hosts, such as Ubuntu server. I found that the “delete” key doesn’t work consistently when I’m using screen, clex, or other applications. The fix is in the Terminal configuration on the Mac. Go to Terminal preferences, select the Advanced tab, and check “Delete sends Ctrl-H”. That’s all it takes to get the “delete” key to work consistently across applications in your SSH sessions.

Check the box indicated in this picture to ensure that the "delete" key works consistently under SSH.

I found this tip at the bottom of the page http://www.macosxhints.com/article.php?story=20040930002324870.