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Currently, the mouse in Konsole can be used to scroll, to highlight/copy/paste, and to scroll within vim; probably other options but this is most of what I use.

It would be great if we could use the mouse for additional text-like capabilities, such as drag-drop highlighted text or to position the cursor by clicking on the location I want the cursor on the line. For example, if I want to modify the previous command, I would like to press the [Up Arrow] key and then use the mouse to move the cursor to the location that I want to modify the previous command (rather than using the keyboard to move backwards in that line of text)

I don't know much about terminal emulators but I would hazard a guess that "that's not how it works".

It's really up to the console application to decide if and how they will respond to mouse commands. All that Konsole is able to do is send input (key sequences, mouse input) to the application.

In order to get the capabilities you want, you need a dedicated graphical shell@kb_scinterpretor; that is, a graphical application that does bash's job (but also provides the emulation features so that console applications can still run). Hotwire shell (http://code.google.com/p/hotwire-shell/) is the first one that comes to mind, but it's been dead for a couple of years. TermKit (http://acko.net/blog/on-termkit) is under active development, but is still rather young (written on Mac, using Safari, with a linux port: http://blog.easytech.com.ar/2011/05/21/ ... th-chrome/).

This is operating system dependent and I don't think there is a more advanced package than gpm around.