This issue was first reported by me in the windows.powershell newsgroup and 'Jeffrey P. Snover[MSFT]' suggested that I submit a bug report for it.
Start-transcript is supposed to log ALL output from the powershell session. However, if you call an executable from within your powershell session, the output will be visible in the window but won't be recorded in the transcript.
Problem has been found in PowerShell 1.0. Additional feedback by another user also confirms the presence of this problem in CTP 2.0.