OK I have finally worked out the strange behavior with WebREPL on ESP32.
It seems the behavior is caused by me using Thonny IDE. It seems Thonny IDE puts the ESP32 boards REPL in to a constant paste mode with echo off and this applies to both UART/USB REPL and WeREPL.
If I use PuTTy as a terminal then I get the expected behavior from WebREPL.
The solution that I found for using WebREPL with Thonny is in Thonny open the system shell as it works as a normal terminal