VS Code extension @ file search missing most workspace directories

Bug Description

The @ file mention/search feature in the Claude Code VS Code extension fails to show most top-level directories in a large workspace. VS Code's native Cmd+P file search works correctly for the same workspace.

Environment

• Claude Code VS Code extension v2.1.52 (darwin-arm64)
• VS Code on macOS (Darwin 25.2.0)
• System ripgrep 14.1.1

Steps to Reproduce

1. Open a workspace with a large file tree (~2.4M files, mostly from node_modules and .venv)
2. Type @ in the Claude Code chat to trigger file search
3. Search for directories/files — only early-alphabetical directories (e.g., apps/) appear
4. Most top-level directories (api/, frontend/, infra/, migrations/) are missing from results

Expected Behavior

All workspace directories and files should be discoverable via @ file search, consistent with Cmd+P behavior.

Actual Behavior

Only a subset of directories appear (seemingly alphabetically early ones like apps/). The rest are invisible in the @ file picker.

Diagnostic Details

• Workspace file counts by top-level directory:
• infra/: 2,252,179 files (mostly node_modules)
• node_modules/: 71,286 files
• frontend/: 59,770 files (includes node_modules)
• .venv/: 28,077 files
• .mypy_cache/: 10,397 files
• All other source directories: < 500 files each

• System ripgrep works correctly: rg --files --max-depth 2 finds files across all directories as expected (ripgrep respects .gitignore and correctly skips node_modules/.venv)

• VS Code Cmd+P works correctly: All directories are searchable

• Attempted fixes (none resolved the issue):
• Added files.exclude and search.exclude for **/.venv, **/node_modules, **/.mypy_cache in .vscode/settings.json
• Set USE_BUILTIN_RIPGREP=0 environment variable
• Reloaded VS Code window
• Fully quit and reopened VS Code

Hypothesis

The extension's @ file picker appears to hit a file count limit or timeout during indexing before it finishes scanning the workspace. Since node_modules and .venv are massive but gitignored, the built-in ripgrep should skip them — but it seems like either the built-in ripgrep isn't respecting .gitignore, or there's an internal cap on results that gets exhausted on early-alphabet directories.