[BUG] Cowork VM fails with HCS 0x800701c0 — MSIX package sends virtualized LocalCache paths to HCS on Windows 11 25H2 Build 26200

Bug Description

Cowork VM fails to start with HCS operation failed: failed to create compute system: HcsWaitForOperationResult failed with HRESULT 0x800701c0 on Windows 11 Pro 25H2 (Build 26200). The root cause is that the Electron app (running inside the MSIX sandbox) resolves %APPDATA%\Claude to the MSIX-virtualized path C:\Users\<user>\AppData\Local\Packages\Claude_pzs8sxrjxfjjc\LocalCache\Roaming\Claude\ and sends these paths to cowork-svc.exe, which passes them to HCS for VM construction. HCS rejects these MSIX LocalCache paths at the kernel level during the async Construct phase.

This is a regression from v1.1.4498.0, which used the real C:\Users\<user>\AppData\Roaming\Claude\ paths and worked correctly on the same machine.

Environment

• OS: Windows 11 Pro 25H2 (Build 26200.8037)
• Claude Desktop: v1.1.7714.0 (MSIX/Windows Store install)
• CPU: Virtualization enabled (VT-x)
• Hyper-V: Enabled, all services running (vmcompute, vmms, hns)
• Containers feature: Enabled
• NTFS Compression: Disabled
• Docker Desktop: Installed (WSL2 backend) — error persists with Docker stopped
• Disk space: 3TB free on C:

Error Details

HCS operation failed: failed to create compute system: HcsWaitForOperationResult failed with HRESULT 0x800701c0: 
{"Error":-2147024448,"ErrorMessage":"","Attribution":[{"OperationFailure":{"Detail":"Construct"}}]}

Root Cause Analysis

Two-stage failure:

Stage 1 — VHDX path not found (initial error):
The Electron app sends the MSIX-virtualized path to cowork-svc.exe. The service checks if rootfs.vhdx exists at ...\Packages\Claude_pzs8sxrjxfjjc\LocalCache\Roaming\Claude\vm_bundles\claudevm.bundle\rootfs.vhdx — but the VM bundle files were downloaded to the real C:\Users\<user>\AppData\Roaming\Claude\vm_bundles\ path (by the service running as SYSTEM, outside the MSIX sandbox).

Stage 2 — HCS Construct failure (after making files visible via hard links):
After creating NTFS hard links to make the VHDX files visible at the MSIX path, the configure step succeeds but HcsCreateComputeSystem fails asynchronously with 0x800701c0. HCS appears to reject VHDX paths that reside within ...\AppData\Local\Packages\<pkg>\LocalCache\... even though SYSTEM has Full Control (verified via icacls).

Evidence from service logs:

Working config (v1.1.4498.0, Feb 28):

[Server] VHDX: C:\Users\james\AppData\Roaming\Claude\vm_bundles\claudevm.bundle\rootfs.vhdx

Failing config (v1.1.7714.0, Mar 20):

[Server] VHDX: C:\Users\james\AppData\Local\Packages\Claude_pzs8sxrjxfjjc\LocalCache\Roaming\Claude\vm_bundles\claudevm.bundle\rootfs.vhdx

HCS Config JSON (from C:\ProgramData\Claude\Logs\cowork-service.log):

The HCS config shows all SCSI VHDX paths use the MSIX LocalCache path. Also notable: "Plan9": {} is empty despite the service log showing [VM] Plan9 share added: home -> C:\Users\james (port=9999).

Workarounds Attempted (all failed)

| Approach | Result |
|----------|--------|
| NTFS hard links from MSIX path to real path | Configure succeeds, HCS Construct fails 0x800701c0 |
| Directory junction (mklink /J) | Configure succeeds, HCS Construct fails 0x800701c0 |
| Registry FilesystemWriteVirtualization = 0 via PsExec | Key created successfully, but app still uses MSIX paths after reboot |
| Stop Docker Desktop + WSL | Same HCS error |
| Verify NTFS compression off | Not compressed, same error |
| Verify all Windows features enabled | Hyper-V, VirtualMachinePlatform, HypervisorPlatform, Containers all enabled |
| Verify SYSTEM permissions on VHDX files | SYSTEM has Full Control, same error |
| Full system reboot | Same error |

Expected Behavior

The app should either:

1. Resolve the MSIX-virtualized path to the real filesystem path before sending to cowork-svc.exe, or
2. cowork-svc.exe should resolve the path before passing to HCS, or
3. Download/copy VM bundle files to the MSIX LocalCache path so they actually exist where the app expects them (the current download lands in the real %APPDATA% path due to the service running as SYSTEM outside the MSIX sandbox)

Related Issues

• #25914 — CoworkVMService crashes on Build 26200
• #29657 — VM bundle empty (rootfs.vhdx/sessiondata.vhdx missing)
• #30584 — EXDEV cross-device link during bundle download
• #32088 — smol-bin.vhdx never downloaded
• #31877 — Duplicate Plan9 shares causing HCS failure

Reproduction Steps

1. Install Claude Desktop from Microsoft Store (MSIX package) on Windows 11 Pro 25H2 Build 26200
2. Launch Claude Desktop
3. Attempt to use Cowork feature
4. Observe "Failed to start Claude's workspace" with HCS 0x800701c0

Diagnostic Files

Relevant logs:

• C:\ProgramData\Claude\Logs\cowork-service.log — contains full HCS config JSON and error
• %APPDATA%\Claude\logs\cowork_vm_node.log — contains Electron-side startup errors