It's not clear to me how installing bash solved your problem but I would like to share my settings for xterm as reference for others.
I use as "Terminal to launch console programs" the following command
xterm -geometry 132x50 -T $TITLE -e
The -geometry part does the resizing magic. How to specify correct parameters is shown in the man page of X.
I still use as "Shell to run commands in" the following command
pirx67