[BUG] MCP filesystem tools failing: TypeError with `read_file` and `edit_block`, tools not working

Environment

• Platform (select one):

• [ ] Anthropic API
• [ ] AWS Bedrock
• [ ] Google Vertex AI
• [x] Other: Claude for Windows (Claude Desktop)
• Claude CLI version: Claude 0.12.28 (5f9bc7)
• Operating System: Windows 11
• Terminal: N/A (GUI client)

Bug Description

On July 23, 2025, Claude Desktop started failing to execute all MCP filesystem tool calls. Errors appear consistently when attempting to read_file or edit_block. The error thrown is:

TypeError: Cannot convert undefined or null to object

Additionally, Claude fails to respond due to apparent system capacity issues:

Due to unexpected capacity constraints, Claude is unable to respond to your message. Please try again soon.

These issues completely block editing or reading files from within Claude Desktop.

Steps to Reproduce

1. Open Claude Desktop (version 0.12.28)
2. Attempt to load or edit any file using a Claude-generated suggestion or manual command
3. Observe the tool failure and error messages

Expected Behavior

Claude should access files via MCP and enable read_file and edit_block operations normally.

Actual Behavior

Claude throws TypeError: Cannot convert undefined or null to object and all tool calls fail. Additionally, server capacity errors intermittently prevent any interaction.

Additional Context

Attached screenshot of the error log below.

<img width="677" height="339" alt="Image" src="https://github.com/user-attachments/assets/23f81012-8d61-4862-aa34-951e0d3dd60b" />

Claude 0.12.28 Build: 5f9bc7 Date: 2025-07-18T21:14:50.000Z

Please advise if this is a known regression or tied to the MCP server.