[quote user="krishnan shanmugam"]from my understanding i need to mount that external crystal (32.7khz) also the capacitors(12.5pf).[/quote]Yes and no. The MSP needs a rather precise clock to generate the proper baudrate. Hence the crystal. However, the MSP has internal capacitors for an effective load of 1pF, 5.5pF, 8.5pF and 11pF.
So if the 11pF option is enabled, you most likely don't need external caps. I guess the demo code you have is already enabling this (check for the XCAP_x setting)
By adding another 10pF to the crystal, you are slowing it down significantly, and the baudrate isn't 9600Bd anymore, resulting in erratic characters being received and echoed.
BTW: for 12.5pF effective load, you will need 2*25pF capacitors (actually 2*23pF, as the MSPs pin capacitance is ~2pF)