[BUG] claudeCode.useTerminal setting has no effect over SSH Remote (VSCodium + Open Remote - SSH)

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?

The claudeCode.useTerminal VSCode setting has no effect when connected to a remote machine via SSH. Claude Code always opens in the native UI panel regardless of the setting value.

The setting is enabled at both User and Remote [SSH: tejo] levels. No workspace-level override exists. The claude CLI is installed and working on the remote machine.

This may be specific to VSCodium + Open Remote - SSH (vs official VS Code + Microsoft Remote - SSH).

What Should Happen?

Claude Code should open in an integrated terminal session instead of the native UI panel when claudeCode.useTerminal is enabled.

Error Messages/Logs

No error messages. The setting is silently ignored — Claude opens in the native UI panel without any indication that terminal mode was requested.

Steps to Reproduce

1. Install Claude Code extension in VSCodium
2. Connect to a remote machine via Open Remote - SSH
3. Open Settings (Cmd+,), search for claudeCode.useTerminal
4. Enable it at both User and Remote levels
5. Reload the window (Cmd+Shift+P → "Developer: Reload Window")
6. Open Claude Code via any method: sidebar icon, command palette ("Claude Code: Open"), or keyboard shortcut
7. Observe: Claude opens in native UI panel, not a terminal

Verified on the remote machine:

• which claude → /Users/headless/.local/bin/claude
• claude --version → 2.1.84 (Claude Code)
• No .vscode/settings.json in workspace

Claude Model

Opus

Is this a regression?

I don't know

Last Working Version

_No response_

Claude Code Version

2.1.84

Platform

Anthropic API

Operating System

macOS

Terminal/Shell

VS Code integrated terminal

Additional Information

_No response_