Seems to me that the terminal mode adjustment applied when meta_flag is non-zero ought to also determine whether the escape sequence is sent.
Wondering if it makes sense for readline not to send out the meta_on escape sequence if rl_prep_terminal is called with a meta_flag of 0 since that disables the terminal mode adjustments for 8 bit input.
Currently using 6.3-release patch 6 on a Gentoo 64 bit Linux 3.10.
trivial test program attached...I usually ran it: script -c './readline-test | od -c' readline-test.log