"[BUG] initialPermissionMode: acceptEdits" and "Allow for this session" not persisting in VSCode extension

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?

possibly related to #12070

Extension version: 2.1.75
OS: Windows 10 Pro (10.0.19045)
VSCode version: 1.100.2

Description:

The permission mode for file edits does not persist as expected, in two separate ways:

claudeCode.initialPermissionMode: "acceptEdits" set in VSCode's settings.json has no effect — the extension always starts with "ask before edits" regardless of this setting.

"Allow for this session" does not cover subsequent edits within the same session — the approval prompt reappears for every individual edit tool call.

What Should Happen?

Expected behavior: Either the settings.json value or "Allow for this session" should suppress subsequent edit approval prompts for the duration of the session.

Actual behavior: Approval is required for every individual file edit regardless of session-level or settings-level configuration.

Error Messages/Logs

Steps to Reproduce

1. Add "claudeCode.initialPermissionMode": "acceptEdits" to VSCode settings.json
2. Also add "defaultMode": "acceptEdits" to ~/.claude/settings.json
3. Restart VSCode
4. Observe that the permission button still shows "ask before edits"
5. Change the toggle to "edit automatically" via the UI
6. Trigger a file edit — still prompted for approval
7. Click "Allow for this session" — prompted again on the next edit

Claude Model

Sonnet (default)

Is this a regression?

I don't know

Last Working Version

_No response_

Claude Code Version

claude-sonnet-4-6

Platform

Anthropic API

Operating System

Windows

Terminal/Shell

VS Code integrated terminal

Additional Information

_No response_