gnuclient from within a tty shell mode?

Hi- I just built and am running xemacs 21.5b16. I sometimes run it in a tty (well...putty window on an XP box ssh'd into a Linux box, with no X display). If I'm running in a shell-mode (`M-x shell') buffer and do a command like gnuclient foo it complains about: IO Error: Terminal type undefined (or can't access database?), "emacs" presumably because my TERM envar was set to "emacs". If I try to set it to "xterm" or some such, then it tries to take over my shell-mode buffer as a tty and run an xemacs within it (presumably not a separate xemacs process, but my existing xemacs process thinking that my shell-mode buffer is a tty that it has to operate within). Any suggestions on getting this to work? (like it used to with xemacs 21.1.8, and other versions I've used) Or should it be filed somewhere as a bug? Thanx, Scott