I think you really want the "<BS>" literally. For me, [in Vim, not
Cream!] pressing Ctrl+V and then <Backspace> produces this. (In Cream,
use Alt+, instead of Ctrl+V.) In other words, you're pressing Ctrl+V
three times and then <Backspace>.

You can try both ":fixdel" and "set t_kb=^V<BS>" from the command
line withouth the if/endif to test.

Still no luck.

I think it would be very interesting to see some debug info and watch what is *exactly* happening inside when I press backspace...  Are there no debug facilities in gvim/cream for plugin/script developers?

Another idea I had was to start and exclude stuff from cream, piece by piece, until the part that causes this problem is isolated, but that's kind of long... I launch cream by executing this script:
              gvim -U NONE -u "\$VIMRUNTIME/cream/creamrc" "$@"

(I don't know where $VIMRUNTIME is set, but the only creamrc I have installed is in /Applications/Vim.app/runtime/cream/creamrc so I guess the $VIMRUNTIME is set correctly by ~/.vimrc or ~/.gvimrc

So, I could start out somewhere (where?) and comment out stuff. Do you have any advice as to where to start doing this?