Comment 4 for bug 644476

Guake seems to need TERM set in the .bash_profile.

cat .bash_profile and see if it exists, a clean install doesn't have one

$ cat .bash_profile
cat: .bash_profile: No such file or directory

If the result is as above run the following

echo -e "TERM=linux\nexport TERM" > .bash_profile

This will create the .bash_profile with the correct settings, then either log out and in again or run the following to kill and re-load guake:

pkill -f "/usr/lib/guake/guake.py"
guake&