[BUG] MSIX filesystem virtualization breaks Cowork real-time streaming on Windows domain-joined machines

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?

Related to #26073 — but this describes a more severe impact: MSIX filesystem virtualization doesn't just affect config paths, it breaks Cowork's real-time streaming/rendering.

Environment

• OS: Windows 11 Pro 23H2 (Build 22631.5335)
• Hardware: Intel i9-10900X, 128 GB RAM, NVIDIA RTX 3080 Ti
• Claude Desktop: 1.1.3541.0 (MSIX)
• Plan: Claude Max
• Domain-joined: Yes (Active Directory)

Problem

On machines where MSIX filesystem virtualization redirects %APPDATA%\Claude\ to the virtualized path (%LOCALAPPDATA%\Packages\Claude_pzs8sxrjxfjjc\LocalCache\Roaming\Claude\), Cowork's UI does not stream progress in real-time. It shows "Working on it..." indefinitely while Claude completes the work in the background. Results only appear when the task is stopped/interrupted.

Comparison across 3 machines (same account, same day, same version)

| Machine | Config Path | Virtualized? | Cowork Streaming | Chat |
|---------|------------|-------------|-----------------|------|
| Desktop (i9, 128GB) | MSIX virtualized path | Yes | Broken | Works perfectly |
| Laptop 1 | %APPDATA%\Claude\ | No | Works perfectly | Works perfectly |
| Laptop 2 | %APPDATA%\Claude\ | No | Works perfectly | Works perfectly |

Key observations

• Chat mode works perfectly on the affected machine
• The VM (vmwp process) shows minimal CPU/RAM (0.65 CPU, 22MB RAM) while Cowork is "stuck"
• When the task is stopped, all completed work appears at once — Claude finished but the UI didn't render
• Multiple complete uninstall/reinstall cycles (4+), registry cleanup, and reboots did not fix the issue
• The virtualization persists regardless — it's determined by the MSIX package manifest

Suggested Fix

Add to AppxManifest.xml:

<virtualization:FileSystemWriteVirtualization>
  <virtualization:ExcludedDirectories>
    <virtualization:ExcludedDirectory>$(KnownFolder:RoamingAppData)\Claude</virtualization:ExcludedDirectory>
  </virtualization:ExcludedDirectories>
</virtualization:FileSystemWriteVirtualization>

What Should Happen?

Cowork should stream progress in real-time regardless of whether the filesystem is virtualized, just like Chat mode does on the same machine. The MSIX package should either disable filesystem virtualization for %APPDATA%\Claude\ or handle the virtualized path correctly for the streaming pipeline.

Error Messages/Logs

No errors in logs. VM starts successfully:
[VM:start] Startup complete, total time: 11896ms
[Keepalive] Starting (interval=2000ms)

Process monitoring shows vmwp barely active (0.65 CPU, 22MB RAM) while Cowork UI is frozen on "Working on it..."

Config path confirms virtualization:
%APPDATA%\Claude\ = EMPTY
%LOCALAPPDATA%\Packages\Claude_pzs8sxrjxfjjc\LocalCache\Roaming\Claude\ = ALL DATA HERE

Steps to Reproduce

1. Install Claude Desktop via Claude Setup.exe on a domain-joined Windows 11 Pro machine
2. The installer requests admin credentials (UAC elevation) — this causes the MSIX package to register for the Administrator user
3. Register the package for the standard user via Add-AppxPackage -RegisterByFamilyName -MainPackage Claude_pzs8sxrjxfjjc
4. Verify the app writes to %LOCALAPPDATA%\Packages\Claude_pzs8sxrjxfjjc\LocalCache\Roaming\Claude\ instead of %APPDATA%\Claude\
5. Open Cowork and assign any task
6. Observe that the UI shows "Working on it..." without streaming progress
7. Stop the task — all completed work appears at once, proving Claude was working but the UI didn't render

Claude Model

Opus

Is this a regression?

No, this never worked

Last Working Version

_No response_

Claude Code Version

Claude Desktop 1.1.3541.0 (MSIX) — this is a Cowork/Desktop issue, not Claude Code CLI

Platform

Anthropic API

Operating System

Windows

Terminal/Shell

PowerShell

Additional Information

This issue is related to #26073 but focuses on a more severe impact beyond config path issues.

What we tried (unsuccessfully):

• 4+ complete uninstall/reinstall cycles
• Cleaning all MSIX registry entries for Administrator user (PolicyCache, Repository, SystemAppData)
• Removing all Claude data from both user profiles
• Rebooting between each attempt
• The filesystem virtualization persists on every reinstall

Why this matters: The same Claude Max account on laptops without virtualization has perfect Cowork streaming. On the affected desktop (with superior hardware: i9-10900X, 128GB RAM), Cowork is essentially unusable for tasks longer than ~30 seconds because the UI never updates.

Suggested fix: Declare %APPDATA%\Claude\ as an unvirtualized directory in the MSIX manifest using FilesystemWriteVirtualization exclusions, or ensure the streaming pipeline works correctly through the virtualized path.