How to handle the junk characters upon conversion of the data from image datatype to varchar?
If you are converting data from one format to another, then there is no such thing as "junk": it is all data, even if it doesn't "look" right. So, if you are saying that the conversion is not producing the expected results, then you need to be clearer about what the expect results should look like. You do mention that:


  col1 starting with "0x7B5C727" is working fine


Well, doing that conversion

SELECT CONVERT(VARCHAR(MAX), 0x7B5C72);


Returns:

{\r


Why is "{\r" considered "working"? If the data in col1 is actual binary data, then you shouldn't be converting it to a string type in the first place. If "{\r" is somehow the expected result, then the fact that

SELECT CONVERT(VARCHAR(MAX), 0xD0CF11E0);


returns:

ÐÏà


would need to also be considered "correct".

Now, there is a minor difference between the two: the "working" input of "0x7B5C727" shows characters that all fall within the standard ASCII set of values 0 - 127 (i.e. 0x00 - 0x7F). But the "not working" input of "0xD0CF11E0" shows characters that mostly fall within the Extended ASCII range of 128 - 255 (i.e. 0x80 - 0xFF) which is determined by the Code Page associated with the default Collation of the database that the query is running in. And, the one character in the standard range -- 0x11 -- is a control character (hence the box). But, while the characters returned for the "not working" set can change per each Code Page, I tried several and they tend to mostly map to the same characters.