Oh brother. Now I know why I feel a need to keep a crucifix handy when I work on a PC. On my setup it works the first time I run it (defined as printing 'hello' after ^Z is pressed). Forever after that (well, several times, until I get bored) the 'hello' is not displayed. I have to reboot the PC in order to see 'hello' again. Très weird.

I have only investigated far enough to note that, as you say, the newline doesn't appear to figure in this at all. It works the first time, and then not again until I restart. Killing the MS-DOS window and starting another one doesn't help.