If you can get a consistent repro outside of neovim, could you file this over at https://github.com/Microsoft/terminal ? I don't think I've seen this variant specifically. Removing neovim from the equation might help identify the root cause here.
Got somewhat the same issue (plus another one), see this github issue. Please submit a github issue here.
Note: I'm not a developer so I really don't know what the solution is, I'm just a user of the Microsoft terminal.
edit: formatting
You know, I would love to implement vintage-style opacity. I really would. But unfortunately, there are some real technical issues to overcome before we can do that. Check out:
Both those threads have a long investigation into why that's not currently possible for the Terminal. We're waiting on WinUI 3 support to be able to get rid of the solid black background for applications, so we can let the underlying content be visible.
I'd love for this feature as well. On Windows, I'm currently using kitty to manage all of my SSH sessions.
Looks like Microsoft is looking into it. See here: https://github.com/microsoft/terminal/issues/1571#issuecomment-519504048.
Ah Issue raised on gh - been closed as doc error :-(
https://github.com/microsoft/terminal/issues/4878#issuecomment-597620535