[BUG] VS Code Extension: ERR_STREAM_PREMATURE_CLOSE on install + "templating..." hang (v2.1.20)

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?

Bug Summary

Two issues introduced in v2.1.20:

1. Extension installation fails with ERR_STREAM_PREMATURE_CLOSE — reported via /status in the CLI
2. IDE prompt input hangs at "templating..." spinner when the prompt contains pipe (|) characters from markdown table content

Environment

• Claude Code version: 2.1.20
• OS: EndeavourOS (Arch-based), Linux 6.18.6-arch1-1
• IDE: Void

Workaround

Rolling back to v2.1.19 resolved both issues:
void --install-extension anthropic.claude-code@2.1.19 --force

Additional Context

• The CLI (claude in terminal) works fine — both issues are VS Code extension-specific
• Issue 2 may be a template parser interpreting | as template syntax rather than literal text

What Should Happen?

Expected: Extension installs or reports already installed. Restarting VS Code did not resolve.

Error Messages/Logs

Actual result:                                                                                                                                                                                      
  IDE:✘ Error installing VS Code extension: 1: Command failed with ERR_STREAM_PREMATURE_CLOSE:                                                                                                        
  code --force --install-extension anthropic.claude-code                                                                                                                                              
  Premature close                                                                                                                                                                                     
  Please restart your IDE and try again.

Steps to Reproduce

Steps to reproduce:

1. Open Claude Code in VS Code extension panel
2. Write a prompt
3. Extension shows a spinner with "templating..." and never completes

Claude Model

Opus

Is this a regression?

Yes, this worked in a previous version

Last Working Version

v2.1.19

Claude Code Version

v2.1.20

Platform

Anthropic API

Operating System

Other Linux

Terminal/Shell

Other

Additional Information

_No response_