check that your default shell for guake really is /bin/bash. I set it to /bin/sh and that reproduces your behaviour exactly, since it won't use the bash PS1 line. To see that setting do: right click > preferences > general > default interpreter. By default this was set to <default interpreter>. I do not know how guake determines that, but I'm guessing this is determined by some environment variable and that you had a problem with that enviroment variable. To "fix" the problem for now, try to set the default shell to /bin/bash. To fix it in a better way, find out how guake determines the default interpreter and check that it is correct.