does not do a 'carriage feed' (so to say), instead the new text overwrites the currently existing text in the same line... Any ideas how I may fix this problem?
I dont know why this is happing with your konsole but this is a very common problem with using putty. If you can give us some more info about what version of kde,konsole you are running. I maybe able to help you debug this situation better.
Also I would advice you to file a bug at http://bugs.kde.org