I think it would be neat if SSH provided an API or a set of special characters so that the remote shell could tell SSH to switch back and forth between remote and local echo. For example, bash could tell SSH to begin local echo mode after it finishes printing the prompt, and end local echo mode when the user enters a key sequence that requires remote processing, like Tab or Return. vim could enter local echo mode when the user enters insert mode and leave when the user presses the Esc or Return, etc.
Perhaps this extra complexity would lead to all sorts of strange bugs though.