I have no access to a device with SSH and so my suggestions below are just general hints according to little information read by me on several web pages just now.

The help contains indeed:

Terminal Type
This option is used to specify the terminal type set on the remote server (an Environment variable). This may be left blank.

UltraEdit uses indeed automatically vt100 on leaving the terminal type edit field blank.

It looks like iptraf-ng adapts its output on the terminal type and uses for the UltraEdit terminal types always black and white output as it thinks, the ANSI escape sequences for colored output are not supported by the terminal emulation used by UltraEdit. I cannot find any information in the Microsoft documentation of the Windows Terminal about the used terminal type.

I suggest to run after establishing the SSH connection with Windows Terminal the command printenv and do the same in UltraEdit SSH console after establishing the connection and compare the two output environment variables list. Perhaps you can see a significant difference regarding to terminal type and try out setting the terminal type in SSH account settings of UltraEdit to the string used by the Windows Terminal.

See also the Linux manual page for term.

It looks like characters from OEM code page 437 or code page 850 are sent to UltraEdit. So there must be clicked most likely on last tab Terminal of SSH/Telnet Account Manager on button Font setup and a font like Terminal or Modern or Roman is selected which are designed especially for OEM/DOS code pages instead of a font designed for ANSI code pages like Windows-1252 (script Western).

I suggest to contact IDM support by email and ask for help on this issue. There is perhaps just a setting necessary of which I am not aware of as not using the SSH / Telnet console feature ever.

I think that the SSH /Telnet console feature is mainly used by programmers writing code in UltraEdit on Windows, compile it locally and upload the created binaries to a remote machine, or upload the source files to remote machine and compile it there using SSH / Telnet console and run the console program on remote machine with usage of the SSH / Telnet console. Therefore just a plain text output without or with text color support is needed  by these users of UltraEdit using SSH / Telnet console. There is no support needed for a SSH / Telnet console capable showing text 100% correct output by programs which emulate graphic dialog windows in a pure text console window.

Did you ask support of UltraEdit per email for help on this issue on which most likely nobody else than you is interested in a solution?
Did you request an enhancement of the SSH/telnet support of UltraEdit for Windows?

There is written nothing about this box drawing characters display issue in SSH/telnet window on the new features tour page or the latest changes page. So it would be necessary to run a test with UltraEdit for Windows v2022.0.0.70 if this issue has been addressed and belongs to the many issues resolved item which is the last item in file changes.txt of installed version 2022.0.0.70. I know that there are really many other issues solved as I received emails from IDM support during beta testing period to do verification on fixes of issues reported by me in the past by email. I updated several posts and added posts to some topics if the reported issue is documented also in a post of the user to user forums.

My own thoughts regarding to this issue:

I still think this is just a configuration issue as this is just a character encoding and character display issue. But I can't help to find the right settings because I don't use SSH/telnet in my daily work with UltraEdit and UEStudio and have no remote device with a program which outputs what the program outputs which is started by you on the remote device.

Windows 10 and Windows 11 have built-in very good support for colored terminal modes as Microsoft has even added a new framework just for that, see the Microsoft documentation page Windows Console and Terminal Ecosystem Roadmap and the other pages in menu on left side. There are also very interesting blogs from Microsoft developers like Windows Command-Line: Unicode and UTF-8 Output Text Buffer.

Someone might think now that the developers of UltraEdit could use the new terminal framework also for SSH/telnet support in UltraEdit. Yes, that would be possible, but that would mean the SSH/telnet feature becomes unavailable for users of UltraEdit still using Windows Vista (hopefully nobody), Windows 7, Windows 8, Windows 8.1 and older versions of Windows 10 which are the platforms on which the built-in SSH/telnet support of UltraEdit is most needed as there is none by the used version of Windows. There are developers which have to maintain code for products with a lifetime of 10 to 20 years who need a long-time support for old versions of Windows beyond the support time of Microsoft because of the entire development environment is not available at all for newest version of Windows. I really know what I am talking about as I am such a developer who has to maintain code of firmware for devices sold since 20 years and still sold with a guaranty of 10 years (from now on).

There was no built-in support for SSH and extended terminal modes by the Windows versions used as SSH/telnet support was first time available in UltraEdit for Windows v12.20 released October 2006. I am sure it was a very valuable feature for many programmers using UltraEdit 15 years ago. But many things change in digital world quite fast. There are nowadays lots of free programs tailor coded for remote device control and service purposes using a pure text interface which is not anymore really of pure text as meta data like color information are transferred with binary byte sequences (terminal ESC sequences).

In my opinion it makes sense to focus development of UltraEdit on its main features for which a powerful text editor is used by most people paying nowadays for commercial software not collecting user data in background to earn money with the collected user data.

However, a requested enhancement in SSH/telnet support could be done in a future version at any time as it happened just two months ago. I was informed by UltraEdit support with an email at beginning of the beta test period of version 2022.0 that an enhancement regarding to the re-indent feature requested by me with an email to Ian D. Mead himself in July 2009 is implemented now in first beta. Well, it was not working as expected by me in all test cases created by me. But with some report mails and multiple beta versions, the re-indent feature works now very good in 2022.0.0.70 and so I could close the almost 13 years old enhancement request with a positive result in my own UltraEdit/UEStudio mail archive.