Very simply, if I start up sqlcmd in a vanilla cmd.exe (windows 7) it behaves in the traditional "insert" mode. If I type some text, move the cursor to the left and type over it, the newly inserted text will move the text to the right of the cursor to the right. If I ssh into my remote server (Windows 2008) and do the same the console goes into overwrite mode whereby the text I type overwrites text to the right of the cursor. This only happens in sqlcmd, and not from a regular cmd.exe or powershell prompt. If I hit the "insert" key on my keyboard when running sqlcmd over ssh the expected insert/overwrite behavior is exhibited. However, each time I hit enter inside of sqlcmd the console reverts to overwrite mode.
Yesterday I discovered the same "revert to overwrite" behavior occurs if I run sqlcmd locally from inside Farmanager v2.0 build 1807 locally. Farmanager does not seem to have a propensity towards overwrite mode otherwise. I linked to this question on their forum.