Hi Oleksandr,

This error is also depending on the current directory.  Or actually just
how long the current $PWD is.  

If you go to /tmp then printf '%4090s' x should trigger the error. 

I think this error is triggered when the commands output is less than
4096 but the sum of the commands output plus the size of current $PWD is
above 4096. (Or N*4096).  Bash appends the $PWD to the commands output
to tell term.el the current directory.  This is made invisible by
term.el.  On the way from the shell to term.el there seem to be
something that splits stuff that is greater than 4096 into fragments.
And term.el do not currently handle when the $PWD is split across two
fragments.

Attached is term-fix.el which contains the term-emulate-terminal
function with the patch applied.  If you evaluate that the error should
go away.

Regards,

/Johan