I am suspicious of Perl's buffering. However, when I try running a similar Perl process using Win32 command with type(cat) it works fine.

I think Corion called it right. From the docs (my emphasis):

The current position of the StreamReader object is not changed by Peek. The returned value is -1 if no more characters are currently available

That suggests .Peek will return -1 when there is nothing currently available. Not when nothing more will ever become available (in a microsecond from now).

Your fix is probabaly to use the "standard c# idiom":

            using (StreamReader sr =  ... ) 
            {
                string line;
                // Read and display lines from the file until the end 
+of 
                // the file is reached.
                while ((line = sr.ReadLine()) != null) 
                {
                    ...
                }
            }
        }
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---

Examine what is said, not who speaks -- Silence betokens consent -- Love the truth but pardon error.

"Science is about questioning the status quo. Questioning authority".

In the absence of evidence, opinion is indistinguishable from prejudice.

"Too many [] have been sedated by an oppressive environment of political correctness and risk aversion."

      int totalBytes = 0;
      int count;
      char[] buffer = new char[4096];
      while ( (count = process.StandardOutput.ReadBlock(buffer, 0, buf
+fer.Length)) > 0 )
      {
        totalBytes += count;
      }
[download]