Do you know whether the application uses (n)curses library or something of its own? Also, curses package has two terminal capability databases: termcap (older) and terminfo (newer). Perhaps something is wrong with that part of setup.
Another thing: IIRC, the default codes wyse60 arrow keys generate are very badly chosen: down-arrow sends linefeed, left-arrow backspace etc. When I was working with physical wy60 terminals I was always remapping them to some ESC sequences (but then I had to tweek all terminal capability descriptions)
I would suggest that you first swithc your terminal emulator to something else (e.g. vt100, if you don't need function keys), and set TERM env variable accordingly. Then, using octal dump (od) command verify that arrow keys produce ANSI escape sequences (or whatever is expected of the terminal emulated by your amulator). Finally, use infocmp to verify that terminal capability database contains correct definitions.
Or, if you want to avoid learning much more about Unix 'TUI' handling than you ever wanted to know, switch to something with WS-like navigation, as suggested (but there things also can go wrong, from similar reasons: editor has to know how to repaint the screen etc).
