I am not able to check this checbox thorugh scripting or manually... setting the value to 'T' throws error that its an invalid value.. setting the val to 'true' doesnt set this value to true

Have you tried true without single or double qoutes

Yes everything

Checking that checkbox sends an email to the assignee when you save, so it's instantly unchecked. Judging from the help page/text, I would say this is expected behaviour.

Check the Notify Assignee by Email box to send an email notification to the person who is assigned to the task. This email informs the person that a task has been created or edited and assigned to him or her. If this person's record does not include an email address, no message is sent.