Yes, the cursor of the first line overlaps the top bar slightly but the text you type on line 1 appears ok. You can report this from
Settings > About > Report an Issue.
Or, just install gnome-terminal, the previous default terminal.
Edit: Same in gnome-terminal. I think it could be nano, not the terminal that’s at fault here.
It works fine for me. I only have 25.10 desktop running as a guest VM on a 24.04 Ubuntu server. I have a clone of the master upstream nano git repository, so if I could have recreated the issue I would have tried nano version 8.7 to determine if it has already been fixed upstream.
It works correctly for me in an installed (and up to date) Ubuntu Desktop 25.10. I’m running Wayland in a Dell Precision M4800 laptop using the default settings (no proprietary driver).
Are you running Wayland or Xorg? What graphics chip/card and what graphics driver are you using?