diff --git a/IPython/core/debugger.py b/IPython/core/debugger.py
index 6c422ec..9f80d24 100644
--- a/IPython/core/debugger.py
+++ b/IPython/core/debugger.py
@@ -32,7 +32,7 @@ import sys
 from IPython.utils import PyColorize
 from IPython.core import ipapi
 from IPython.utils import coloransi
-from IPython.utils.io import Term
+import IPython.utils.io
 from IPython.core.excolors import exception_colors
 
 # See if we can use pydb.
@@ -171,7 +171,7 @@ class Pdb(OldPdb):
 
         # Parent constructor:
         if has_pydb and completekey is None:
-            OldPdb.__init__(self,stdin=stdin,stdout=Term.cout)
+            OldPdb.__init__(self,stdin=stdin,stdout=IPython.utils.io.Term.cout)
         else:
             OldPdb.__init__(self,completekey,stdin,stdout)
             
@@ -279,7 +279,7 @@ class Pdb(OldPdb):
     def print_stack_entry(self,frame_lineno,prompt_prefix='\n-> ',
                           context = 3):
         #frame, lineno = frame_lineno
-        print >>Term.cout, self.format_stack_entry(frame_lineno, '', context)
+        print >>IPython.utils.io.Term.cout, self.format_stack_entry(frame_lineno, '', context)
 
         # vds: >>
         frame, lineno = frame_lineno
@@ -419,7 +419,7 @@ class Pdb(OldPdb):
                 src.append(line)
                 self.lineno = lineno
 
-            print >>Term.cout, ''.join(src)
+            print >>IPython.utils.io.Term.cout, ''.join(src)
 
         except KeyboardInterrupt:
             pass
diff --git a/IPython/core/history.py b/IPython/core/history.py
index e21a197..14ad06e 100644
--- a/IPython/core/history.py
+++ b/IPython/core/history.py
@@ -5,7 +5,8 @@
 import fnmatch
 import os
 
-from IPython.utils.io import Term, ask_yes_no
+import IPython.utils.io
+from IPython.utils.io import ask_yes_no
 from IPython.utils.warn import warn
 from IPython.core import ipapi
 
@@ -62,7 +63,7 @@ def magic_history(self, parameter_s = ''):
     try:
         outfname = opts['f']
     except KeyError:
-        outfile = Term.cout  # default
+        outfile = IPython.utils.io.Term.cout  # default
         # We don't want to close stdout at the end!
         close_at_end = False
     else:
@@ -101,7 +102,7 @@ def magic_history(self, parameter_s = ''):
         init, final = map(int, args)
     else:
         warn('%hist takes 0, 1 or 2 arguments separated by spaces.')
-        print >> Term.cout, self.magic_hist.__doc__
+        print >> IPython.utils.io.Term.cout, self.magic_hist.__doc__
         return
     
     width = len(str(final))
diff --git a/IPython/core/hooks.py b/IPython/core/hooks.py
index 97990c8..8639388 100644
--- a/IPython/core/hooks.py
+++ b/IPython/core/hooks.py
@@ -46,7 +46,7 @@ import sys
 
 from pprint import PrettyPrinter
 
-from IPython.utils.io import Term
+import IPython.utils.io
 from IPython.utils.process import shell
 
 from IPython.core.error import TryNext
@@ -175,13 +175,13 @@ def result_display(self,arg):
             # So that multi-line strings line up with the left column of
             # the screen, instead of having the output prompt mess up
             # their first line.                
-            Term.cout.write('\n')
-        print >>Term.cout, out
+            IPython.utils.io.Term.cout.write('\n')
+        print >>IPython.utils.io.Term.cout, out
     else:
         # By default, the interactive prompt uses repr() to display results,
         # so we should honor this.  Users who'd rather use a different
         # mechanism can easily override this hook.
-        print >>Term.cout, repr(arg)
+        print >>IPython.utils.io.Term.cout, repr(arg)
     # the default display hook doesn't manipulate the value to put in history
     return None 
 
diff --git a/IPython/core/interactiveshell.py b/IPython/core/interactiveshell.py
index 46272d9..94a0fdf 100644
--- a/IPython/core/interactiveshell.py
+++ b/IPython/core/interactiveshell.py
@@ -53,7 +53,8 @@ from IPython.utils import PyColorize
 from IPython.utils import pickleshare
 from IPython.utils.doctestreload import doctest_reload
 from IPython.utils.ipstruct import Struct
-from IPython.utils.io import Term, ask_yes_no
+import IPython.utils.io
+from IPython.utils.io import ask_yes_no
 from IPython.utils.path import get_home_dir, get_ipython_dir, HomeDirError
 from IPython.utils.process import getoutput, getoutputerror
 from IPython.utils.strdispatch import StrDispatch
@@ -250,6 +251,10 @@ class InteractiveShell(Configurable, Magic):
         self.init_syntax_highlighting()
         self.init_hooks()
         self.init_pushd_popd_magic()
+        # TODO: init_io() needs to happen before init_traceback handlers
+        # because the traceback handlers hardcode the stdout/stderr streams.
+        # This logic in in debugger.Pdb and should eventually be changed.
+        self.init_io()
         self.init_traceback_handlers(custom_exceptions)
         self.init_user_ns()
         self.init_logger()
@@ -411,6 +416,17 @@ class InteractiveShell(Configurable, Magic):
                                             'NoColor',
                                             self.object_info_string_level)
 
+    def init_io(self):
+        import IPython.utils.io
+        if sys.platform == 'win32' and readline.have_readline and \
+            self.readline_use:
+            Term = IPython.utils.io.IOTerm(
+                cout=readline._outputfile,cerr=readline._outputfile
+            )
+        else:
+            Term = IPython.utils.io.IOTerm()
+        IPython.utils.io.Term = Term
+
     def init_prompts(self):
         # Initialize cache, set in/out prompts and printing system
         self.outputcache = CachedOutput(self,
@@ -1997,12 +2013,12 @@ class InteractiveShell(Configurable, Magic):
     # TODO:  This should be removed when Term is refactored.
     def write(self,data):
         """Write a string to the default output"""
-        Term.cout.write(data)
+        IPython.utils.io.Term.cout.write(data)
 
     # TODO:  This should be removed when Term is refactored.
     def write_err(self,data):
         """Write a string to the default error output"""
-        Term.cerr.write(data)
+        IPython.utils.io.Term.cerr.write(data)
 
     def ask_yes_no(self,prompt,default=True):
         if self.quiet:
diff --git a/IPython/core/macro.py b/IPython/core/macro.py
index 8fb52a6..676e083 100644
--- a/IPython/core/macro.py
+++ b/IPython/core/macro.py
@@ -7,7 +7,7 @@
 #  the file COPYING, distributed as part of this software.
 #*****************************************************************************
 
-from IPython.utils.io import Term
+import IPython.utils.io
 from IPython.core.autocall import IPyAutocall
 
 class Macro(IPyAutocall):
@@ -32,7 +32,7 @@ class Macro(IPyAutocall):
         return 'IPython.macro.Macro(%s)' % repr(self.value)
     
     def __call__(self,*args):
-        Term.cout.flush()
+        IPython.utils.io.Term.cout.flush()
         self._ip.user_ns['_margv'] = args
         self._ip.runlines(self.value)
     
diff --git a/IPython/core/magic.py b/IPython/core/magic.py
index fad3f6b..5cd7429 100644
--- a/IPython/core/magic.py
+++ b/IPython/core/magic.py
@@ -58,7 +58,8 @@ from IPython.lib.pylabtools import mpl_runner
 from IPython.lib.inputhook import enable_gui
 from IPython.external.Itpl import itpl, printpl
 from IPython.testing import decorators as testdec
-from IPython.utils.io import Term, file_read, nlprint
+from IPython.utils.io import file_read, nlprint
+import IPython.utils.io
 from IPython.utils.path import get_py_filename
 from IPython.utils.process import arg_split, abbrev_cwd
 from IPython.utils.terminal import set_term_title
@@ -3093,7 +3094,7 @@ Defaulting color scheme to 'NoColor'"""
         # If all looks ok, proceed
         out,err = self.shell.getoutputerror(cmd)
         if err:
-            print >> Term.cerr,err
+            print >> IPython.utils.io.Term.cerr, err
         if opts.has_key('l'):
             out = SList(out.split('\n'))
         else:
@@ -3143,7 +3144,7 @@ Defaulting color scheme to 'NoColor'"""
         if parameter_s:
             out,err = self.shell.getoutputerror(parameter_s)
             if err:
-                print >> Term.cerr,err
+                print >> IPython.utils.io.Term.cerr, err
             return SList(out.split('\n'))
 
     def magic_r(self, parameter_s=''):
diff --git a/IPython/core/oinspect.py b/IPython/core/oinspect.py
index 91ac5a5..723acae 100644
--- a/IPython/core/oinspect.py
+++ b/IPython/core/oinspect.py
@@ -30,7 +30,7 @@ import types
 from IPython.core.page import page
 from IPython.external.Itpl import itpl
 from IPython.utils import PyColorize
-from IPython.utils.io import Term
+import IPython.utils.io
 from IPython.utils.text import indent
 from IPython.utils.wildcard import list_namespace
 from IPython.utils.coloransi import *
@@ -249,7 +249,7 @@ class Inspector:
         if output is None:
             self.noinfo('definition header',oname)
         else:
-            print >>Term.cout, header,self.format(output),
+            print >>IPython.utils.io.Term.cout, header,self.format(output),
 
     def pdoc(self,obj,oname='',formatter = None):
         """Print the docstring for any object.
diff --git a/IPython/core/page.py b/IPython/core/page.py
index f26075a..e8a234e 100755
--- a/IPython/core/page.py
+++ b/IPython/core/page.py
@@ -36,7 +36,7 @@ from IPython.core import ipapi
 from IPython.core.error import TryNext
 from IPython.utils.cursesimport import use_curses
 from IPython.utils.data import chop
-from IPython.utils.io import Term
+import IPython.utils.io
 from IPython.utils.process import xsys
 from IPython.utils.terminal import get_terminal_size
 
@@ -56,18 +56,18 @@ def page_dumb(strng, start=0, screen_lines=25):
     out_ln  = strng.splitlines()[start:]
     screens = chop(out_ln,screen_lines-1)
     if len(screens) == 1:
-        print >>Term.cout, os.linesep.join(screens[0])
+        print >>IPython.utils.io.Term.cout, os.linesep.join(screens[0])
     else:
         last_escape = ""
         for scr in screens[0:-1]:
             hunk = os.linesep.join(scr)
-            print >>Term.cout, last_escape + hunk
+            print >>IPython.utils.io.Term.cout, last_escape + hunk
             if not page_more():
                 return
             esc_list = esc_re.findall(hunk)
             if len(esc_list) > 0:
                 last_escape = esc_list[-1]
-        print >>Term.cout, last_escape + os.linesep.join(screens[-1])
+        print >>IPython.utils.io.Term.cout, last_escape + os.linesep.join(screens[-1])
 
 
 def page(strng, start=0, screen_lines=0, pager_cmd=None):
@@ -156,7 +156,7 @@ def page(strng, start=0, screen_lines=0, pager_cmd=None):
     #print 'numlines',numlines,'screenlines',screen_lines  # dbg
     if numlines <= screen_lines :
         #print '*** normal print'  # dbg
-        print >>Term.cout, str_toprint
+        print >>IPython.utils.io.Term.cout, str_toprint
     else:
         # Try to open pager and default to internal one if that fails.
         # All failure modes are tagged as 'retval=1', to match the return
@@ -262,13 +262,13 @@ if os.name == 'nt' and os.environ.get('TERM','dumb') != 'emacs':
 
         @return:    True if need print more lines, False if quit
         """
-        Term.cout.write('---Return to continue, q to quit--- ')
+        IPython.utils.io.Term.cout.write('---Return to continue, q to quit--- ')
         ans = msvcrt.getch()
         if ans in ("q", "Q"):
             result = False
         else:
             result = True
-        Term.cout.write("\b"*37 + " "*37 + "\b"*37)
+        IPython.utils.io.Term.cout.write("\b"*37 + " "*37 + "\b"*37)
         return result
 else:
     def page_more():
diff --git a/IPython/core/prefilter.py b/IPython/core/prefilter.py
index ca9c295..a7bd9c6 100755
--- a/IPython/core/prefilter.py
+++ b/IPython/core/prefilter.py
@@ -36,7 +36,7 @@ from IPython.core.splitinput import split_user_input
 from IPython.core.page import page
 
 from IPython.utils.traitlets import List, Int, Any, Str, CBool, Bool, Instance
-from IPython.utils.io import Term
+import IPython.utils.io
 from IPython.utils.text import make_quoted_expr
 from IPython.utils.autoattr import auto_attr
 
@@ -922,7 +922,7 @@ class AutoHandler(PrefilterHandler):
                 # plain ascii works better w/ pyreadline, on some machines, so
                 # we use it and only print uncolored rewrite if we have unicode
                 rw = str(rw)
-                print >>Term.cout, rw
+                print >>IPython.utils.io.Term.cout, rw
             except UnicodeEncodeError:
                 print "-------------->" + newcmd
             
diff --git a/IPython/core/prompts.py b/IPython/core/prompts.py
index 2220fdb..14231c8 100644
--- a/IPython/core/prompts.py
+++ b/IPython/core/prompts.py
@@ -25,7 +25,7 @@ from IPython.core.error import TryNext
 from IPython.utils import coloransi
 import IPython.utils.generics
 from IPython.utils.warn import warn
-from IPython.utils.io import Term
+import IPython.utils.io
 
 #****************************************************************************
 #Color schemes for Prompts.
@@ -537,7 +537,7 @@ class CachedOutput:
             except KeyError:
                 pass
         if arg is not None:
-            cout_write = Term.cout.write # fast lookup
+            cout_write = IPython.utils.io.Term.cout.write # fast lookup
             # first handle the cache and counters
 
             # do not print output if input ends in ';'
@@ -577,7 +577,7 @@ class CachedOutput:
             if self.logger.log_output:
                 self.logger.log_write(repr(arg),'output')
             cout_write(self.output_sep2)
-            Term.cout.flush()
+            IPython.utils.io.Term.cout.flush()
 
     def _display(self,arg):
         """Default printer method, uses pprint.
diff --git a/IPython/core/ultratb.py b/IPython/core/ultratb.py
index d5b3e22..40b74e1 100644
--- a/IPython/core/ultratb.py
+++ b/IPython/core/ultratb.py
@@ -95,7 +95,7 @@ from IPython.core import debugger, ipapi
 from IPython.core.display_trap import DisplayTrap
 from IPython.core.excolors import exception_colors
 from IPython.utils.data import uniq_stable
-from IPython.utils.io import Term
+import IPython.utils.io
 from IPython.utils.warn import info, error
 
 # Globals
@@ -313,14 +313,11 @@ def _format_traceback_lines(lnum, index, lines, Colors, lvals=None,scheme=None):
 class TBTools:
     """Basic tools used by all traceback printer classes."""
 
-    #: Default output stream, can be overridden at call time.  A special value
-    #: of 'stdout' *as a string* can be given to force extraction of sys.stdout
-    #: at runtime.  This allows testing exception printing with doctests, that
-    #: swap sys.stdout just at execution time.
-    #: Warning: be VERY careful to set this to one of the Term streams, NEVER
-    #: directly to sys.stdout/err, because under win32 the Term streams come from
-    #: pyreadline and know how to handle color correctly, whie stdout/err don't.
-    out_stream = Term.cerr
+    # This attribute us used in globalipapp.py to have stdout used for
+    # writting exceptions. This is needed so nose can trap them. This attribute
+    # should be None (the default, which will use IPython.utils.io.Term) or
+    # the string 'stdout' which will cause the override to sys.stdout.
+    out_stream = None
 
     def __init__(self,color_scheme = 'NoColor',call_pdb=False):
         # Whether to call the interactive pdb debugger after printing
@@ -384,9 +381,9 @@ class ListTB(TBTools):
         TBTools.__init__(self,color_scheme = color_scheme,call_pdb=0)
         
     def __call__(self, etype, value, elist):
-        Term.cout.flush()
-        Term.cerr.write(self.text(etype,value,elist))
-        Term.cerr.write('\n')
+        IPython.utils.io.Term.cout.flush()
+        IPython.utils.io.Term.cerr.write(self.text(etype,value,elist))
+        IPython.utils.io.Term.cerr.write('\n')
 
     def text(self, etype, value, elist, context=5):
         """Return a color formatted string with the traceback info.
@@ -535,10 +532,13 @@ class ListTB(TBTools):
         """
         # This method needs to use __call__ from *this* class, not the one from
         # a subclass whose signature or behavior may be different
-        Term.cout.flush()
-        ostream = sys.stdout if self.out_stream == 'stdout' else Term.cerr
+        if self.out_stream == 'stdout':
+            ostream = sys.stdout
+        else:
+            ostream = IPython.utils.io.Term.cerr
+        ostream.flush()
         ostream.write(ListTB.text(self, etype, value, []))
-        ostream.flush()        
+        ostream.flush()
 
     def _some_str(self, value):
         # Lifted from traceback.py
@@ -659,7 +659,7 @@ class VerboseTB(TBTools):
             # So far, I haven't been able to find an isolated example to
             # reproduce the problem.
             inspect_error()
-            traceback.print_exc(file=Term.cerr)
+            traceback.print_exc(file=IPython.utils.io.Term.cerr)
             info('\nUnfortunately, your original traceback can not be constructed.\n')
             return ''
 
@@ -696,7 +696,7 @@ class VerboseTB(TBTools):
                 # able to remove this try/except when 2.4 becomes a
                 # requirement.  Bug details at http://python.org/sf/1005466
                 inspect_error()
-                traceback.print_exc(file=Term.cerr)
+                traceback.print_exc(file=IPython.utils.io.Term.cerr)
                 info("\nIPython's exception reporting continues...\n")
                 
             if func == '?':
@@ -717,7 +717,7 @@ class VerboseTB(TBTools):
                     # and barfs out. At some point I should dig into this one
                     # and file a bug report about it.
                     inspect_error()
-                    traceback.print_exc(file=Term.cerr)
+                    traceback.print_exc(file=IPython.utils.io.Term.cerr)
                     info("\nIPython's exception reporting continues...\n")
                     call = tpl_call_fail % func
 
@@ -910,9 +910,9 @@ class VerboseTB(TBTools):
     def handler(self, info=None):
         (etype, evalue, etb) = info or sys.exc_info()
         self.tb = etb
-        Term.cout.flush()
-        Term.cerr.write(self.text(etype, evalue, etb))
-        Term.cerr.write('\n')
+        IPython.utils.io.Term.cout.flush()
+        IPython.utils.io.Term.cerr.write(self.text(etype, evalue, etb))
+        IPython.utils.io.Term.cerr.write('\n')
 
     # Changed so an instance can just be called as VerboseTB_inst() and print
     # out the right info on its own.
@@ -1032,8 +1032,11 @@ class AutoFormattedTB(FormattedTB):
           given at initialization time.  """
 
         if out is None:
-            out = sys.stdout if self.out_stream=='stdout' else self.out_stream
-        Term.cout.flush()
+            if self.out_stream == 'stdout':
+                out = sys.stdout
+            else:
+                out = IPython.utils.io.Term.cerr
+        out.flush()
         if tb_offset is not None:
             tb_offset, self.tb_offset = self.tb_offset, tb_offset
             out.write(self.text(etype, evalue, etb))
diff --git a/IPython/deathrow/gui/wx/ipshell_nonblocking.py b/IPython/deathrow/gui/wx/ipshell_nonblocking.py
index b8d4907..8644ade 100755
--- a/IPython/deathrow/gui/wx/ipshell_nonblocking.py
+++ b/IPython/deathrow/gui/wx/ipshell_nonblocking.py
@@ -24,7 +24,7 @@ import locale
 from thread_ex import ThreadEx
 
 from IPython.core import iplib
-from IPython.utils.io import Term
+import IPython.utils.io
 
 ##############################################################################
 class _Helper(object):
diff --git a/IPython/deathrow/ipipe.py b/IPython/deathrow/ipipe.py
index c440e6e..8c2766d 100644
--- a/IPython/deathrow/ipipe.py
+++ b/IPython/deathrow/ipipe.py
@@ -133,7 +133,7 @@ from IPython.external import simplegeneric
 from IPython.external import path
 
 try:
-    from IPython.utils.io import Term
+    import IPython.utils.io
     from IPython.utils import generics
 except ImportError:
     Term = None
diff --git a/IPython/deathrow/oldfrontend/prefilterfrontend.py b/IPython/deathrow/oldfrontend/prefilterfrontend.py
index 327ea0a..20726e2 100644
--- a/IPython/deathrow/oldfrontend/prefilterfrontend.py
+++ b/IPython/deathrow/oldfrontend/prefilterfrontend.py
@@ -31,7 +31,7 @@ from IPython.kernel.core.redirector_output_trap import RedirectorOutputTrap
 
 from IPython.kernel.core.sync_traceback_trap import SyncTracebackTrap
 
-from IPython.utils.io import Term
+import IPython.utils.io
 
 from linefrontendbase import LineFrontEndBase, common_prefix
 
diff --git a/IPython/deathrow/twshell.py b/IPython/deathrow/twshell.py
index 3270d65..dd09e7e 100644
--- a/IPython/deathrow/twshell.py
+++ b/IPython/deathrow/twshell.py
@@ -14,7 +14,7 @@ from IPython.core.iplib import InteractiveShell
 from IPython.utils.ipstruct import Struct
 import Queue,thread,threading,signal
 from signal import signal, SIGINT
-from IPython.utils.io import Term, ask_yes_no
+import IPython.utils.io, ask_yes_no
 from IPython.utils.warn import warn, error
 from IPython.utils.decorators import flag_calls
 from IPython.core import shellglobals
diff --git a/IPython/extensions/pretty.py b/IPython/extensions/pretty.py
index 3adf476..17a6e5c 100644
--- a/IPython/extensions/pretty.py
+++ b/IPython/extensions/pretty.py
@@ -39,7 +39,7 @@ from IPython.core.error import TryNext
 from IPython.external import pretty
 from IPython.core.plugin import Plugin
 from IPython.utils.traitlets import Bool, List, Instance
-from IPython.utils.io import Term
+import IPython.utils.io
 from IPython.utils.autoattr import auto_attr
 from IPython.utils.importstring import import_item
 
@@ -100,8 +100,8 @@ class PrettyResultDisplay(Plugin):
                 # So that multi-line strings line up with the left column of
                 # the screen, instead of having the output prompt mess up
                 # their first line.                
-                Term.cout.write('\n')
-            print >>Term.cout, out
+                IPython.utils.io.Term.cout.write('\n')
+            print >>IPython.utils.io.Term.cout, out
         else:
             raise TryNext
 
diff --git a/IPython/kernel/core/prompts.py b/IPython/kernel/core/prompts.py
index fc583ea..ab36fa1 100644
--- a/IPython/kernel/core/prompts.py
+++ b/IPython/kernel/core/prompts.py
@@ -32,7 +32,7 @@ from IPython.external.Itpl import ItplNS
 from IPython.utils import coloransi
 from IPython.core import release
 from IPython.core.error import TryNext
-from IPython.utils.io import Term
+import IPython.utils.io
 from IPython.utils.warn import warn
 import IPython.utils.generics
 
diff --git a/IPython/lib/demo.py b/IPython/lib/demo.py
index 398eca3..580588f 100644
--- a/IPython/lib/demo.py
+++ b/IPython/lib/demo.py
@@ -176,7 +176,8 @@ import shlex
 import sys
 
 from IPython.utils.PyColorize import Parser
-from IPython.utils.io import file_read, file_readlines, Term
+from IPython.utils.io import file_read, file_readlines
+import IPython.utils.io
 from IPython.utils.text import marquee
 
 __all__ = ['Demo','IPythonDemo','LineDemo','IPythonLineDemo','DemoError']
@@ -318,7 +319,7 @@ class Demo(object):
         
         if index is None:
             if self.finished:
-                print >>Term.cout, 'Demo finished.  Use <demo_name>.reset() if you want to rerun it.'
+                print >>IPython.utils.io.Term.cout, 'Demo finished.  Use <demo_name>.reset() if you want to rerun it.'
                 return None
             index = self.block_index
         else:
@@ -387,9 +388,9 @@ class Demo(object):
         if index is None:
             return
 
-        print >>Term.cout, self.marquee('<%s> block # %s (%s remaining)' %
+        print >>IPython.utils.io.Term.cout, self.marquee('<%s> block # %s (%s remaining)' %
                            (self.title,index,self.nblocks-index-1))
-        print >>Term.cout,(self.src_blocks_colored[index])
+        print >>IPython.utils.io.Term.cout,(self.src_blocks_colored[index])
         sys.stdout.flush()
 
     def show_all(self):
@@ -402,12 +403,12 @@ class Demo(object):
         marquee = self.marquee
         for index,block in enumerate(self.src_blocks_colored):
             if silent[index]:
-                print >>Term.cout, marquee('<%s> SILENT block # %s (%s remaining)' %
+                print >>IPython.utils.io.Term.cout, marquee('<%s> SILENT block # %s (%s remaining)' %
                               (title,index,nblocks-index-1))
             else:
-                print >>Term.cout, marquee('<%s> block # %s (%s remaining)' %
+                print >>IPython.utils.io.Term.cout, marquee('<%s> block # %s (%s remaining)' %
                               (title,index,nblocks-index-1))
-            print >>Term.cout, block,
+            print >>IPython.utils.io.Term.cout, block,
         sys.stdout.flush()
 
     def runlines(self,source):
@@ -432,18 +433,18 @@ class Demo(object):
             next_block = self.src_blocks[index]
             self.block_index += 1
             if self._silent[index]:
-                print >>Term.cout, marquee('Executing silent block # %s (%s remaining)' %
+                print >>IPython.utils.io.Term.cout, marquee('Executing silent block # %s (%s remaining)' %
                               (index,self.nblocks-index-1))
             else:
                 self.pre_cmd()
                 self.show(index)
                 if self.auto_all or self._auto[index]:
-                    print >>Term.cout, marquee('output:')
+                    print >>IPython.utils.io.Term.cout, marquee('output:')
                 else:
-                    print >>Term.cout, marquee('Press <q> to quit, <Enter> to execute...'),
+                    print >>IPython.utils.io.Term.cout, marquee('Press <q> to quit, <Enter> to execute...'),
                     ans = raw_input().strip()
                     if ans:
-                        print >>Term.cout, marquee('Block NOT executed')
+                        print >>IPython.utils.io.Term.cout, marquee('Block NOT executed')
                         return
             try:
                 save_argv = sys.argv
@@ -461,10 +462,10 @@ class Demo(object):
         if self.block_index == self.nblocks:
             mq1 = self.marquee('END OF DEMO')
             if mq1:
-                # avoid spurious print >>Term.cout,s if empty marquees are used
-                print >>Term.cout
-                print >>Term.cout, mq1
-                print >>Term.cout, self.marquee('Use <demo_name>.reset() if you want to rerun it.')
+                # avoid spurious print >>IPython.utils.io.Term.cout,s if empty marquees are used
+                print >>IPython.utils.io.Term.cout
+                print >>IPython.utils.io.Term.cout, mq1
+                print >>IPython.utils.io.Term.cout, self.marquee('Use <demo_name>.reset() if you want to rerun it.')
             self.finished = True
 
     # These methods are meant to be overridden by subclasses who may wish to
diff --git a/IPython/utils/io.py b/IPython/utils/io.py
index 30408e2..e38445b 100644
--- a/IPython/utils/io.py
+++ b/IPython/utils/io.py
@@ -65,21 +65,10 @@ class IOTerm:
     # In the future, having IPython channel all its I/O operations through
     # this class will make it easier to embed it into other environments which
     # are not a normal terminal (such as a GUI-based shell)
-    def __init__(self,cin=None,cout=None,cerr=None):
-        self.cin  = IOStream(cin,sys.stdin)
-        self.cout = IOStream(cout,sys.stdout)
-        self.cerr = IOStream(cerr,sys.stderr)
-
-
-# Global variable to be used for all I/O
-Term = IOTerm()
-
-
-import IPython.utils.rlineimpl as readline
-# Remake Term to use the readline i/o facilities
-if sys.platform == 'win32' and readline.have_readline:
-
-    Term = IOTerm(cout=readline._outputfile,cerr=readline._outputfile)
+    def __init__(self, cin=None, cout=None, cerr=None):
+        self.cin  = IOStream(cin, sys.stdin)
+        self.cout = IOStream(cout, sys.stdout)
+        self.cerr = IOStream(cerr, sys.stderr)
 
 
 class Tee(object):
diff --git a/IPython/utils/warn.py b/IPython/utils/warn.py
index 772faed..bc9edd3 100644
--- a/IPython/utils/warn.py
+++ b/IPython/utils/warn.py
@@ -16,7 +16,7 @@ Utilities for warnings.  Shoudn't we just use the built in warnings module.
 
 import sys
 
-from IPython.utils.io import Term
+import IPython.utils.io
 
 #-----------------------------------------------------------------------------
 # Code
@@ -25,7 +25,7 @@ from IPython.utils.io import Term
 def warn(msg,level=2,exit_val=1):
     """Standard warning printer. Gives formatting consistency.
 
-    Output is sent to Term.cerr (sys.stderr by default).
+    Output is sent to IPython.utils.io.Term.cerr (sys.stderr by default).
 
     Options:
 
@@ -41,9 +41,9 @@ def warn(msg,level=2,exit_val=1):
 
     if level>0:
         header = ['','','WARNING: ','ERROR: ','FATAL ERROR: ']
-        print >> Term.cerr, '%s%s' % (header[level],msg)
+        print >> IPython.utils.io.Term.cerr, '%s%s' % (header[level],msg)
         if level == 4:
-            print >> Term.cerr,'Exiting.\n'
+            print >> IPython.utils.io.Term.cerr,'Exiting.\n'
             sys.exit(exit_val)
 
             
diff --git a/IPython/zmq/ipkernel.py b/IPython/zmq/ipkernel.py
index f3d883d..82a048c 100755
--- a/IPython/zmq/ipkernel.py
+++ b/IPython/zmq/ipkernel.py
@@ -266,9 +266,12 @@ def main():
     req_port = bind_port(req_socket, namespace.ip, namespace.req)
     print >>sys.__stdout__, "REQ Channel on port", req_port
 
-    # Redirect input streams and set a display hook.
+    # Redirect input streams. This needs to be done before the Kernel is done
+    # because currently the Kernel creates a ZMQInteractiveShell, which
+    # holds references to sys.stdout and sys.stderr.
     sys.stdout = OutStream(session, pub_socket, u'stdout')
     sys.stderr = OutStream(session, pub_socket, u'stderr')
+    # Set a displayhook.
     sys.displayhook = DisplayHook(session, pub_socket)
 
     # Create the kernel.
diff --git a/IPython/zmq/zmqshell.py b/IPython/zmq/zmqshell.py
index 6044287..62ba5d0 100644
--- a/IPython/zmq/zmqshell.py
+++ b/IPython/zmq/zmqshell.py
@@ -19,4 +19,13 @@ class ZMQInteractiveShell(InteractiveShell):
                 print line
         return p.wait()
 
+    def init_io(self):
+        # This will just use sys.stdout and sys.stderr. If you want to
+        # override sys.stdout and sys.stderr themselves, you need to do that
+        # *before* instantiating this class, because Term holds onto 
+        # references to the underlying streams.
+        import IPython.utils.io
+        Term = IPython.utils.io.IOTerm()
+        IPython.utils.io.Term = Term
+
 InteractiveShellABC.register(ZMQInteractiveShell)