Unable to set $TERM in screen (always defaults to xterm)

[Leo Alekseyev]

On Ubuntu 9.10, GNU screen ignores any attempt to set the TERM
variable -- either by setting term="xterm-256color" in .screenrc, or
using :term command in screen itself, or using a -T command line
switch. Whatever I do, $TERM is stuck at xterm. Somehow screen is able
to display 256 colors under gnome-terminal, but under xterm it
defaults to 8.  I tried reinstalling from the repositories and
compiling from source, and I still see this behavior.  Can someone
explain what is going on and how to fix it?  TIA.