[BUG] Terminal rendering issues in VS Code on Windows - excessive blank space and obscured output

Environment

• Claude Code version: 2.0.73
• VS Code version: 1.107.1 (x64)
• Platform: Windows 11 (Build 26200)
• Terminal: VS Code integrated terminal (PowerShell / Git Bash)

Description

After a recent Claude Code update, the VS Code integrated terminal exhibits severe rendering issues:

1. Excessive blank space between output sections (multiple empty lines where there should be none)
2. Output text is obscured/cut off - text appears fragmented and hard to read
3. Non-ASCII text (Korean) rendering issues - characters appear broken/scattered
4. Status line updates cause display corruption

Steps to Reproduce

1. Open VS Code on Windows 11
2. Open integrated terminal (Ctrl+\`)
3. Run \claude\ command
4. Perform any operation (e.g., read a file, ask a question)
5. Observe: Large vertical gaps appear in output, text is cut off or obscured

Expected Behavior

• Clean, continuous output without excessive blank lines
• All text visible and properly formatted
• Status line updates don't corrupt the display

Actual Behavior

• 3-5+ blank lines appear between output sections
• Text is fragmented and partially hidden
• Output becomes increasingly corrupted as conversation continues
• Interface becomes nearly unusable

Screenshot

The terminal shows large gaps between outputs and text being cut off mid-sentence. The status bar at bottom shows "*Accomplishing..." while the main content area has corrupted rendering.

Related Issues

• #4136 - Too much blank space at bottom of terminal
• #3116 - Terminal UI Rendering Instability in VSCode with Multiple Panes

Workaround

Running Claude Code in external terminal (Windows Terminal, PowerShell standalone) works correctly. Issue is specific to VS Code integrated terminal.

Additional Context

This appears to be a regression in version 2.0.x. The issue is reproducible 100% of the time in VS Code integrated terminal on Windows.