File search in VSCode sidebar: no fuzzy matching, spaces not recognized

Description

The file search/picker in the VSCode sidebar extension does not support fuzzy matching and fails to handle spaces in filenames/paths. This makes it very difficult to find and attach files, especially in vaults or projects with complex directory structures.

Steps to Reproduce

1. Open Claude Code in the VSCode sidebar
2. Try to search for a file using @ or the file picker
3. Type a filename containing spaces → no results
4. Try fuzzy matching (e.g. partial path segments) → no results

Expected Behavior

• Spaces in filenames should be handled correctly
• Fuzzy matching should work (similar to VSCode's native Ctrl+P file picker)

Actual Behavior

• Spaces break the search entirely
• Only exact prefix matches seem to work
• Finding deeply nested files is nearly impossible without typing the full path

Related

This is a continuation of #1931 which was automatically closed due to inactivity (not because it was resolved). That issue had 16 comments from users experiencing the same problem.

Environment

• Claude Code VSCode Extension
• macOS