Someone on a private mailing list I'm on lamented the problem with powershell's '>' redirection operator defaulting inflexibly to use unicode for encoding the output file. This is not very compatible for NT's ancient console subsystem which works best with ASCII data. Fortunately, there's an easy workaround to fix this:

Due to the magic of command discovery and the fact that > really does use out-file, you can "fix" this by placing the following in your $profile:

function out-file($FilePath, $Encoding, [switch]$Append) {
$input | microsoft.powershell.utility\out-file $filepath -encoding ascii `
     -append:$append
}

From now on, > will be forced to use ASCII encoding. This works because functions have higher precedence than built-in commands in powershell's command discovery search.

UPDATE: Rather annoyingly, I'm informed that this particular workaround doesn't work on v1.0 of PowerShell. I tested the above on v2.0CTP2 only. Doh.