[Bug] Chat display issues with excessive spacing and missing content after recent updates

Bug Description
So, my chats have had lots of spacing and content not being displayed since the recent updates (instant compact, flickering reduction)...

Environment Info

• Platform: win32
• Terminal: windows-terminal
• Version: 2.0.73
• Feedback ID: 3620acd8-3059-488a-a8bf-6a736b912077

Spacing issues:

<img width="1143" height="476" alt="Image" src="https://github.com/user-attachments/assets/92885351-a6b3-4e6b-87ae-7e334e26bc4c" />

Errors

[{"error":"Error\n    at Eu (B:/~BUN/root/claude.exe:58:1144)\n    at <anonymous> (B:/~BUN/root/claude.exe:59:10093)\n    at emit (node:events:92:22)\n    at endReadableNT (internal:streams/readable:861:50)\n    at processTicksAndRejections (native:7:39)\n    at request (B:/~BUN/root/claude.exe:61:2149)\n    at processTicksAndRejections (native:7:39)","timestamp":"2025-12-19T12:27:17.994Z"},{"error":"Error\n    at Eu (B:/~BUN/root/claude.exe:58:1144)\n    at <anonymous> (B:/~BUN/root/claude.exe:59:10093)\n    at emit (node:events:92:22)\n    at endReadableNT (internal:streams/readable:861:50)\n    at processTicksAndRejections (native:7:39)\n    at request (B:/~BUN/root/claude.exe:61:2149)\n    at processTicksAndRejections (native:7:39)","timestamp":"2025-12-19T12:27:17.998Z"},{"error":"Error\n    at Eu (B:/~BUN/root/claude.exe:58:1144)\n    at <anonymous> (B:/~BUN/root/claude.exe:59:10093)\n    at emit (node:events:92:22)\n    at endReadableNT (internal:streams/readable:861:50)\n    at processTicksAndRejections (native:7:39)\n    at request (B:/~BUN/root/claude.exe:61:2149)\n    at processTicksAndRejections (native:7:39)","timestamp":"2025-12-19T12:27:18.410Z"}]