I am reasonably happy with Terminal.app and very unhappy with iTerm (the damn thing keeps crashing), but am I missing out on a better, more feature rich OS X terminal?
This may be somewhat of a tangential answer, but have you considered a virtual terminal, like screen? It provides a bunch of features and is platform independent, so you can use what you've learned wherever. Currently I use screen with Terminal.app, and have no compatibility issues.
My favorite feature is that it maintains state between logins, so I can login and logout of a machine and have my work be exactly where it was.
I used to use iTerm a lot (never had stability issues), but never bothered installing it when I upgraded to 10.5. The built-in terminal app works quite well, and has all the features I've ever wanted.
I use Terminal.app as well, unfortunately echoing much of the above, but I really haven't used anything else that would have merited deviating from the traditional Mac OSX terminal.
You do raise an interesting software development idea, either for developing add-ons to Terminal.app for increased functionality or otherwise, but I haven't heard of anything already on the market.
I tend to use XCode for development work in OSX, so it blends naturally with the native Terminal.app
Just to make sure you've tried it -- are you running the latest released iTerm, or the latest beta? I had a ton of problems with the released version (0.9.5) a while back, but once I upgraded to the beta channel, I've been very happy.
On the download page, make sure you download the "recent binary build from CVS", and you might be surprisingly happy with the progress that's been made in the Land of iTerm.
Don't overlook glterminal (or here), which is lots of fun if you've ever used a real terminal. It has the old green (or amber) fonts, the flickering and even the distortion that make you feel right back in the 80's (or is it 70's?).
ZOC SSH Client is pretty feature rich (telnet, serial connections, ssh, tabbed sessions, scripting, logging, keyboard remapping).
If you know SecureCRT on Windows you'll get the idea.