Open an Emacs buffer when a command tries to open an editor in shell-mode

I like to use Emacs' shell mode, but it has a few deficiencies. One of those is that it's not smart enough to open a new buffer when a shell command tries to invoke an editor. For example with the environment variable VISUAL set to vim I get the following from svn propedit:

$ svn propedit svn:externals . 
"svn-prop.tmp" 2L, 149C[1;1H
~                                                                               [4;1H~                                                                               [5;1H~                                                                               [6;1H~                                                                               [7;1H~            
...

(It may be hard to tell from the representation, but it's a horrible, ugly mess.)

With VISUAL set to "emacs -nw", I get

$ svn propedit svn:externals .
emacs: Terminal type "dumb" is not powerful enough to run Emacs.
It lacks the ability to position the cursor.
If that is not the actual type of terminal you have,
use the Bourne shell command `TERM=... export TERM' (C-shell:
`setenv TERM ...') to specify the correct type.  It may be necessary
to do `unset TERMINFO' (C-shell: `unsetenv TERMINFO') as well.svn: system('emacs -nw svn-prop.tmp') returned 256

(It works with VISUAL set to just emacs, but only from inside an Emacs X window, not inside a terminal session.)

Is there a way to get shell mode to do the right thing here and open up a new buffer on behalf of the command line process?