I just tried to do that on a Win7 machine sitting next to me and it didn't work... it doesn't seem to let me highlight anything at all? I normally wouldn't comment about something like this but I wanted to do this literally 10 minutes before I read your comment. Anyway I don't think it's controversial to suggest that the stock terminal on Windows kind of sucks, although I gather that PowerShell is pretty good.
Hit alt-space (?) or click in the top left corner to open the system menu (?).
It has menu items for copy and paste; 'Properties' allows one to enable a more useful way of copy/paste (QuickEdit mode, IIRC).
It isn't enabled by default in case people want to run DOS apps with mouse support. Someone should start a pool for people predicitng when this default will be changed.
