Exactly what the title asks. Is the terminal window a text editor, can it be used as one, and if not then which are some good ones to install?
No, the terminal is not a text editor (even though it can be used as one). The terminal is a program where you can issue commands to your system.
Commands are nothing but binaries (executables in the form of binary language) and scripts located in specific paths of your system. Each command executes one specific task.
There are a few text editors for the command line interface, such as nano (a.k.a. Pico) and vim. For example, if you run
nano in your terminal it will open a blank text file that you can edit/save.