Maybe the problem could be in the tee program? Just for grins, try running with my Perl version of tee. I doubt that it has a chance, but I've seen weirdo problems with tee before on Windows. Anyway here is my tee.pl and this tee is doing unbuffered output:

#!usr/bin/perl -w
use strict;
$|=1;  #turn autoflush on

sub usage () 
{
   print "TEE USAGE:\n".
         " program | tee outfile\n".
         " sends stdout from program to outfile\n";
         exit;
}

my $filename = shift @ARGV;
usage unless $filename;

open (OUTFILE, ">", "$filename")
          or (die "Can't open OUTFILE: $!");

while (<>)
{
  print;
  print OUTFILE;
}
[download]

Not claiming anything, but just curious if this makes a difference.

Update: I posted a simple program at Re^3: Trouble with an array inside a format call that demo's what the $|=1 does with just a few print statements. This is why I think that a simple test with my tee.pl is worth a couple of minutes of testing. tee is doing the printing and it won't matter if your app that sends input into tee is unbuffered or not if tee is doing some buffering.