As per discussion on msysgit user group: 
https://groups.google.com/forum/?fromgroups=#!topic/msysgit/U_a982_a3rc/discussion
we found the following patch is required to get rid of weird terminal 
characters for other tools such as GitExtensions for Windows

---8<---
diff --git a/sideband.c b/sideband.c
index d5ffa1c..bd3e5a8 100644
--- a/sideband.c
+++ b/sideband.c
@@ -29,7 +29,7 @@ int recv_sideband(const char *me, int in_stream, int out)
 
  memcpy(buf, PREFIX, pf);
  term = getenv("TERM");
- if (term && strcmp(term, "dumb"))
+ if (isatty(out) && term && strcmp(term, "dumb"))
  suffix = ANSI_SUFFIX;
  else
  suffix = DUMB_SUFFIX;
---8<---

-- 


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