I've been using xterm with lucida console and up until the recent versions of cygwin-xfree it worked fine. With the latest versions, however, there were problems with the vertical spacing and overwriting and stuff. Characters with descenders ("g" "q" etc) would get slightly overwritten by characters on the line below, and backspacing over these chars with descenders wouldn't erase the bottom of the descender parts. (Ie., in xterm write qqqqqq and then backspace a few times, and a row of dots remains behind at the bottom of the line).
I fixed this problem by adding a line to my /etc/fonts/local.conf: <edit name="minspace" mode="assign"><bool>true</bool></edit> Not sure if this is a problem specific to Lucida Console, and if so whether its a problem with the font itself or with freetype2 or whatever, but anyway with the above line added, everything works just great. Lev