The only decent solution in my view would be a new, separate kind of terminal spec, maybe even completely focused at terminal emulators. It could make sense to handle input better(maybe even with keyup/keydown events) and maybe display images in a non-hacky way(it can already be done via w3m...kind of).

Changing the existing standards just won't work as it would break a ton of programs, although if I'm being honest - while I like the idea of such a terminal rework - I don't know if it can be done nowadays without it opening the flood gates by developers who just can't restrain themselves from adding so many features it might as well be a new browser engine.

And either way I don't think it's worth the effort as those input limitations only affect a few specific situations. I use hundreds of custom keybindings in Vim and so far the only obstacle I encountered was the `Tab` & `Ctrl-i` overlap. If I need to hold down more than one modifier I did something wrong anyway.