[BUG] VS Code Extension — Severe Regressions since v2.0.34

Preflight Checklist

• [x] I have searched existing issues and this hasn't been reported yet
• [x] This is a single bug report (please file separate reports for different bugs)
• [x] I am using the latest version of Claude Code

What's Wrong?

Since extension version 2.0.35+, Claude Agent interactions have become significantly slower and the extension introduces UI regressions in the panel/log view: heavy lags, broken manual scrolling, and an aggressive auto-scroll that constantly yanks the view to the bottom. When the session “runs out of context,” the context consolidationstalls for 10+ minutes with little/no progress feedback, blocking further work. These issues cause major productivity loss.

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Issues & Impact

1) Severe lag / UI jank during agent runs

• Observed: Large latency and stutters while Claude is generating; editor and extension panel become sluggish (typing, panel resizing, switching tabs).
• Impact: Editor responsiveness degrades; cumulative delays, frequent need to pause until the agent finishes.

2) Broken manual scrolling in the Agent/Chat panel

• Observed: While agent is streaming, manual scroll cannot stay at prior position; view is force-snapped back to the latest chunk (“current index”).
• Regression: Prior to 2.0.35, we could scroll up to inspect reasoning steps and then jump back down to live output.
• Impact: Impossible to review intermediate steps or copy earlier content while agent is still working; interrupts interactive workflows.

3) Aggressive auto-scroll with no reliable override

• Observed: Auto-scroll constantly re-enables/overrides user scrolling intent during streaming.
• Impact: Disastrous UX: the view keeps jumping, causing lost selection, mis-clicks, and wasted time.

4) Excessive delay on “context consolidation” when out of context

• Observed: When the session reaches token limits, the extension enters a “consolidation” phase that may stall ≥ 10 minutes before resuming.

Overall severity: High (Daily productivity regression, repeated blocking).

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Notes

• Behavior was correct before v2.0.35: manual scroll remained stable during streaming, and overall responsiveness was acceptable.
• The current behavior appears to be a clear regression in scroll handling + rendering + consolidation performance.

What Should Happen?

• Smooth editor responsiveness during streaming.

• User-controlled scroll that stays where the user left it until they opt back into live auto-scroll.

• Context rollover within seconds, or at least with transparent progress, cancellability, and the ability to continue working.

Error Messages/Logs

Steps to Reproduce

1. Open a medium/large project (TypeScript/Node monorepo works reliably).
2. Trigger a Claude Agent task that streams a long response (e.g., multi-file refactor with reasoning).
3. While streaming:

• Attempt to scroll up in the chat/agent panel to review earlier reasoning.
• Observe forced auto-scroll back to bottom; selection is lost.

1. Continue sending follow-up prompts until the session hits context limits.
2. Observe context consolidation takes several minutes with little/no progress feedback.

Claude Model

Sonnet (default)

Is this a regression?

Yes, this worked in a previous version

Last Working Version

2.0.34

Claude Code Version

2.0.37

Platform

Anthropic API

Operating System

macOS

Terminal/Shell

Terminal.app (macOS)

Additional Information

_No response_