I am currently interested in switching from vim to emacs.

One of the more compelling reasons for this is the smooth integration with a unix environment. The most experienced emacs users I have seen have a bash prompt at the bottom of their window, with stdout going to a buffer right above it. They then interact with the output of programs such as grep in interesting ways.

I am on Ubuntu 10.04 and the default emacs environment does not seem to do much for me in the way of integration. For example, in the M-x shell mode, output from basic commands like ls produce lots of strange characters and hitting the up arrow does not go to previous commands.

Any recommendations on a good direction to go in?