From: http://superuser.com/questions/186284/mac-terminals-slow
Are you scrolling and cursor-positioning by holding down the arrow keys and relying on automatic key repeat? If so, then the problem may simply be your key repeat rate. You can adjust that in the Keyboard panel of System Preferences.
If you already have your Key Repeat Rate and Delay Before Repeat set to their fastest settings, then you may want to think about tweaking them manually using this trick that was posted on StackOverflow: http://stackoverflow.com/questions/171326/how-can-i-increase-the-key-repeat-rate-beyond-the-oss-limit/429465#429465
You might also want to turn off Smooth Scrolling in the Appearance panel of System Preferences, in case that's slowing you down.
It would also be interesting to compare Mac OS X's built-in Terminal.app to other terminal emulators on Mac OS X, such as iTerm, or xterm in the built-in X11 environment, or even Single User Mode (hold down Cmd-S at boot until you get a shell prompt) to see how those other emulators compare for the speed issues you're talking about.
Once upon a time, Terminal.app was a bit slow when dumping tons of text to the window like cat'ing a huge file, because it insisted on drawing every character to the screen no matter how far behind it was getting on outputting the queued text, and it was taking too long to draw proper antialiased glyphs for every character. I haven't seen that be a problem in years and years though.
Change key repeat rate on that stackoverflow:
On Mac OS X, open the Global Preferences plist
open ~/Library/Preferences/.GlobalPreferences.plist Then change the KeyRepeat field. Smaller numbers will speed up your cursor rate. The settings dialog will only set it to a minimum of 2, so if you go to 0 or 1, you'll get a faster cursor.
I had to reboot for this to take effect.