Invoking `ssh` in a command substitution in a `ProxyCommand` hangs

Prerequisites

• Write a descriptive title.
• Make sure you are able to repro it on the latest version
• Search the existing issues.

Steps to reproduce

I'm using a ProxyCommand that itself invokes SSH via command substitution in PowerShell, which can be simplified to the following configuration:

Host host
    User <user-on-host>
Host test
    User <user-on-host>
    ProxyCommand powershell.exe -noprofile -command "ssh -x -W $(ssh -x -n host echo host):%p host"

where host is a Linux host I have access to, i.e. I can do ssh host. I invoke the following command:

ssh test

This command hangs.

The same configuration works in WSL (OpenSSH_8.9p1 Ubuntu-3, OpenSSL 3.0.2 15 Mar 2022), and connects me to host. EDIT 2024-12-01 An equivalent configuration also works in WSL, which does not involve PowerShell:

Host host
    User <user-on-host>
Host test2
    User <user-on-host>
    ProxyCommand ssh -W $(ssh -x -n host echo host):%p host

Expected behavior

I get a shell on host.

Actual behavior

The command hangs. When I type ctrl-c, I get:

chan_shutdown_write: channel 0: close() failed for fd -1 [i3 o1]: Interrupted function call

Error details

PowerShell does not return an error.

Environment data

Name                           Value                                                                                                                                                                            
----                           -----                                                                                                                                                                            
PSVersion                      5.1.22621.4249                                                                                                                                                                   
PSEdition                      Desktop                                                                                                                                                                          
PSCompatibleVersions           {1.0, 2.0, 3.0, 4.0...}                                                                                                                                                          
BuildVersion                   10.0.22621.4249                                                                                                                                                                  
CLRVersion                     4.0.30319.42000                                                                                                                                                                  
WSManStackVersion              3.0                                                                                                                                                                              
PSRemotingProtocolVersion      2.3                                                                                                                                                                              
SerializationVersion           1.1.0.1

Version

OpenSSH_for_Windows_9.8p1 Win32-OpenSSH-GitHub, LibreSSL 3.9.2

Visuals

No response

Begin by reproducing issue 2305 with the shown ProxyCommand in Windows PowerShell, then compare it with the equivalent WSL command-substitution case. Trace the SSH invocation and ProxyCommand behavior involved in the hang; done means ssh test reaches a shell on host without requiring Ctrl-C.