While using the File Level Restore (FLR) feature of the Plug-in for Hyper-V to restore a single file, the file is successfully restored to the target directory but seems unreadable when opened in the relevant text editor.
The original file is 3KB at the time of backup and hasn't been changed since then. However the restored copy is 64KB with added unreadable characters.
Restoring the whole VM however from the same backup, shows that the file is of the normal size and is readable.
This is a known problem when File Level Indexing is used on compressed NTFS volumes.
As per the current Plug-in for Hyper-V Release Notes:
Disable NTFS drive compression to prevent this issue during File Level Restores.
Additionally, when restoring the whole VM image, all stored files will be restored to their original state at the time of the backup, as this problem only affects File Level Restore.
Bug 29043 will be resolved in a future version of the Plug-in for Hyper-V. The issue still exists in the current plug-in version 11.1.