I can't verify this with my setup (I can't get my backspace key to misbehave in an xterm), but I think this behavior is controlled by the xterm controls
backarrowKey. You can read about these in the xterm man page. You might try holding the Ctrl key while you press the left mouse button in your xterm window and checking or unchecking Backarrow Key (BS/DEL).
On a different system that the one I'm using now, I had this in my ~/.Xdefaults file:
so you might also try that. For new settings in a ~/.Xdefaults file to take effect, you'll have to either log out and back in, or execute this command at a shell prompt:
xrdb -override ~/.Xdefaults