PuTTY is so much better just at the UI level than Window's command prompt that I wish stuff like Cygwin and msysgit could use it instead. Unfortunately it doesn't seem the code is very modular.
Maybe it sounds like overkill, but I use SSH to localhost to access the cygwin, as I typically need functioning SSH anyway. Combined with Pageant, I don't have to type login and I type pageant password only once after the boot and it just works. It's all the stuff I need anyway so I don't have to use any patched version of something.
I use this, too, and it's excellent with cygwin. Also if you use Puttygen to generate RSA keys you can set-up easy one-click access to your favorite servers.
I like Console2, but it's had a long running bug for me on multiple machines and Windows versions where the last line of the console won't display any characters after scrolling the window, and it eventually drove me nuts enough to stop using it.
I suggest using Cygwin's xterm instead of cmd.exe for accessing Cygwin. You can modify the Cygwin startup script (or create another one) to start X and an xterm automatically. It scrolls a lot faster than cmd.exe and seems less Rube Goldbergian than using PuTTY to connect to localhost.
