Try mintty[1], comes default with Cygwin these days. Not perfect, but a lot better than the alternatives I've tried. It supports select-to-copy and middle-mouse-to-paste, which is something that's very deeply embedded in my muscle memory.
Yuck yuck yuck. And yuck to ctrl-Insert / shift-Insert too, though that's better. I very much like the fact that on OS X the default copy-paste keys are command-c / command-v which don't conflict with UNIX's use of ctrl. If I can bind Windows-C / Windows-V to copy/paste in a terminal emulator I'd be happier.
Select-to-copy is yuck for two reasons:
1: After you select, it copies and then deselects. This is annoying if you want to see that you selected the right thing, and it doesn't allow you to change your selection if you see you were off by a character.
2: I like to select to mark my place sometimes, but I don't want that to change what's on my system clipboard.
ctrl/shift Insert is yuck because it's a two-hand keystroke and doesn't have an easy way to remember whether shift or ctrl is the copy. (I don't often make mistakes between the two, but it leaves me unsure of myself which is a half second lost to hesitation each time.)
I have the same problem with ctrl/shift Insert, but I'm very happy with select-to-copy, which on Linux doesn't conflict with the ctrl-c/ctrl-v content (they're separate clipboards).
I miss middle-click to paste and select-to-copy where ever I can't use them.
[1] https://code.google.com/p/mintty/