Jan, Thank you. After some further investigations, I switched to
use x11:
in maxima-init:
set_plot_option([gnuplot_term, x11])$
and maxima plot window shows up.
I also put in my .bashrc:
export GNUTERM='x11'
and the broken Octave plot is back too.
Lion does not come with X11. I downloaded XQuartz and linked
X11.app to XQuartz.app.
-Michael