Never see this, but 1 weird setting is the "VT100J" under the HyperTerminal window, beside the 9600-N-1. Normally is Auto-detect or ANSI or ANSIW
Try to change it and check whether it is fixed, not sure is that setting causing the problem.
Goto File->Properties, the Properties window will appear, click the Settings tab, You will see Emulation dropbox, choose ANSI or ANSIW, and click OK.