What you're doing and what's happening: (Copy & paste specific commands and their output, or include screen shots)
I'm using Fixedsys Excelsio font, and this happened:

What's wrong / what should be happening instead:
The text turned to small text after typing "--" with Fixedsys Excelsio font
This font in VSCode

Woah holy crap, that's insane.
@miniksa thoughts?
Looks like maybe #610
@miniksa I'm going to use this as the master external issue tracking what used to be MSFT:21252989 "_unbroken runs containing ligatures occasionally cause font size flickering_". It looks like the same problem.
Just to reinforce the issue, it doesn't happen only with this font. LigConsalata (an Inconsolata variant with ligatures) seems to be broken as well on any line with ligatures.
How it looks when it is broken (in this case the "->" ligature breaks the line)

How it looks when there is no ligature around:

What I found interesting is that when the line breaks and the rest of it doesn't have any ligature it displays fine that part of the line (as can be seems on the first print). I suppose it re-render the whole terminal line whenever there's a ligature and that's where it is breaking on those fonts.
I tested both on windows and WSL2, and the same happens on both. Fira Code doesn't seem to break any line, though.
In case it helps, that's where I got the LigConsolata font:
https://github.com/googlefonts/Inconsolata/tree/master/fonts/ttf
That's spectacular. My guess at it is that something is detecting the run is suddenly "complex" and then mucking up what sub-segments of the run have what properties. I'll get to this.
:tada:This issue was addressed in #4081, which has now been successfully released as Windows Terminal Preview v0.8.10261.0.:tada:
Handy links: