• VSCode Version: 1.4.0
• OS Version: Windows 7

Steps to Reproduce:

1. Install Git for Windows in C:\Users\<username>\AppData\Local\Programs\Git.
2. Open some project.
3. Set terminal.integrated.shell.windows to %LocalAppData%\\Programs\\Git\\bin\\bash.exe.
4. Open integrated terminal.
5. Set terminal.integrated.shell.windows to C:\\Users\\<username>\\AppData\\Local\\Programs\\Git\\bin\\bash.exe.
6. Open integrated terminal.

What happens:

1. On 4: Got error: The terminal process terminated with exit code: 1
2. On 6: Integrated terminal opens as expected.

Expected:
It seems vscode doesn't recognize environment variables in integrated terminal paths. It should.