Hmm, wasn't # the default erase character for teletype-era Unix? And @ the "kill" character (like modern ^U)? That would have made them a little annoying to type—not annoying enough to keep them from being used for cpp, though, and https://github.com/memnoth/unix-v6/blob/master/sys/dmr/tty.c... suggests that you could type \#. (There was no "lnext" yet; it was just hardcoded to backslash.)

The actual input erase handling is on https://github.com/memnoth/unix-v6/blob/master/sys/dmr/tty.c.... The relevant struct member is declared in https://github.com/memnoth/unix-v6/blob/master/sys/tty.h#L35 and initialized to CERASE in each tty driver, for example, https://github.com/memnoth/unix-v6/blob/master/sys/dmr/kl.c#..., using the macro defined in https://github.com/memnoth/unix-v6/blob/master/sys/tty.h#L48.

So by default # was special, just to the kernel tty driver, not the shell.