In most .emacs setups, M-! (ie executing a shell command) invokes a non-interactive shell. usually this is because you use this to run non-interactive tasks, ie no stdin , just a command (like make).
What you
to do is open a shell in a new frame, not run a shell command. I'm not if there's a default key binding for this, but since i use xemacs i can just click on the "Tools" menu. Although i find a