VS Code extension ignores Edit/Write permission rules in settings files

Bug Description

Edit and Write permission rules configured in .claude/settings.local.json and .claude/settings.json are not respected by the VS Code extension. The permission prompt still appears for every Edit/Write tool call regardless of configuration.

Environment

• OS: Windows 11 Home 10.0.26200
• Claude Code: VS Code extension (latest)
• Shell: bash (Git Bash)

Configuration

.claude/settings.local.json (project-level):

{
  "permissions": {
    "allow": [
      "Write(.claude/**)",
      "Edit(.claude/**)"
    ]
  }
}

.claude/settings.json (project-level):

Also contains Bash permission rules that DO work correctly.

Steps to Reproduce

1. Add Edit(.claude/**) or even Edit(**) to the allow list in .claude/settings.local.json
2. Start a session in VS Code extension
3. Have Claude attempt to edit any file matching the pattern (e.g., .claude/skills/knowledge-ingestor/scripts/store_knowledge.py)
4. Permission prompt still appears asking for approval

Expected Behavior

Edits matching the configured allow patterns should be auto-approved without prompting.

Actual Behavior

Permission prompt appears for every Edit/Write call regardless of configured rules. This happens across all sessions (not limited to restored/stuck sessions). Restarting VS Code does not resolve it.

Notes

• Bash permission rules in the same settings files appear to work correctly
• This affects productivity significantly when sessions need to make many edits
• Tested with both narrow patterns (Edit(.claude/**)) and broad patterns (Edit(**)) — neither is respected
• May be related to Windows path normalization (forward slash patterns vs backslash actual paths)