I confirm that it _is_ working on XP the way intended (ie. shaping is now disabled).
In passing, it looks like I can't see any Arabic characters if I use PuTTY's "Lucida Console" fonts. My older version (0.53b) worked fine with that font and I just tried Simon vanilla 0.54 release and it shows the shaped Arabic there as well (so it most likely not a font issue after all). In short, if I select "Lucida Console" font (via the "Appearance->Change->Lucida Console, Regular, 14") empty spaces appear where Arabic characters should be - all is fine while using the default "Courier New".
i just checked Lucida Console in the Character Map... it doesnt have any arabic Glyphs...!! :)
Ahmad/Musab, I'll fire off an email to Simon to get him to re-engage so we can move a step ahead (the "Lucida Console" can be looked into later I guess).