Folks, there has been some talk about it and I decided to try it myself:
I booted a homemade 1.6 install CD on my Ultra 2 using keyboard/console.
I left the terminal setting at "sun" (the default) and installed on a scratch
disk. I could set the timezone without any problem. Cursor keys worked,
and Page-Down/Page-Up moved forward/back a page.

But I found an old report, that blamed the problem on type-4 keyboards.
Unfortunately I only own type 5 or type 6 ones, so I can't test these
nor analyze or fix it.

>Number:         11943
>Category:       install
>Synopsis:       Sun type 4 keyboard versus sysinst

>Number:         18547
>Category:       install
>Synopsis:       sparc new install scripts need ctrl-HJKL for cursor movement (all installs do)

If someone has a type 4 keyboard, could you please check this?
You don't need to install anything new, just boot a 1.6 sysinst based install
kernel or miniroot, select the Utility menu and go to "Change Timezone".
You can bail out before changing anything on your disk.

Thanks, 

Martin