[FEATURE] VS Code Extension: Option to always show file diffs in VS Code editor panel instead of inline chat

Preflight Checklist

• [x] I have searched existing requests and this feature hasn't been requested yet
• [x] This is a single feature request (not multiple features)

Problem Statement

This is specific to the VS Code extension experience.

When reviewing code changes Claude Code makes in the VS Code extension, diffs are shown in two different places depending on which internal tool was used. Small edits (Edit tool) appear inline in the chat panel, while full file writes (Write tool) open a proper side-by-side diff in the main editor panel.

This inconsistency makes it harder to review changes. The inline chat diffs lack syntax highlighting, full file context, and the familiar navigation I get from VS Code's native diff viewer. I find myself needing to manually open the file and check git diff to properly review small edits, which slows down my workflow.

I'd like a setting to always open diffs in the main VS Code editor panel as a side-by-side diff view, regardless of which tool was used internally.

Proposed Solution

Add a VS Code setting (e.g. claude.diffDisplay with options "inline" | "editor" | "auto") that controls where file edit diffs are displayed. "editor" would always open diffs in the main editor panel using VS Code's native diff view. "auto" would preserve the current behavior (default).

Alternative Solutions

_No response_

Priority

Medium - Would be very helpful

Feature Category

Configuration and settings

Use Case Example

_No response_

Additional Context

_No response_