Full color support in OS X Terminal.app
Add full ANSI color support to Terminal.app
By: nentis on Wed, Oct 15 '03 at 8:51PM PDT
I use bash, and added the following to my ~/.bash_profile
ls and mutt work just fine.
Taken from comments in this article: http://www.macosxhints.com/article.php?story=20020408225741777