I think there isn't a proper solution yet. However there's git bash, if you would like to try the reverse and just go with bash on Windows. I found its a solution that works for now. Select git bash as default terminal profile. Then it is important to disable the copilot tool 'Terminal Selection' and copilots bash commands are working then.
Confirmed by Copilot:
✅ mkdir/rmdir Test Complete
Test Results:
✅ Directory Creation: mkdir test-directory - Successfully created
✅ Directory Verification: ls -la | grep test-directory - Found the directory with proper permissions
✅ Directory Removal: rmdir test-directory - Successfully removed
✅ Cleanup Verification: ls -la | grep test-directory - Directory no longer exists (exit code 1 = no matches found)
Git Bash Commands Work Perfectly:
mkdir - Creates directories
rmdir - Removes empty directories
ls -la - Lists files with detailed permissions
Pipe operations (|) work correctly
grep filtering works as expected