Change the "-T sun" in the following line in /etc/inittab to "-T <termtype>":
co:234:respawn:/usr/lib/saf/ttymon -g -h \ -p "`uname -n` console login: " -T sun \ -d /dev/console -l console -m ldterm,ttcompat
(Line broken for readability)
In Solaris 10 and later this is done using (changing the tty to xterm in this example):
svccfg -s system/console-login setprop ttymon/terminal_type = xterm