I noticed this too. The fix is simple enough though. Just edit /etc/inputrc -- the first few lines currently look like this:

 set meta-flag on 
 set input-meta on
 set convert-meta off
 set output-meta on
[download]

All you have to do is change the first character of the words on/off to be uppercase like so:

 set meta-flag On
 set input-meta On
 set convert-meta Off
 set output-meta On
[download]

Thats it!
-Eric