Title: VS Code extension non-functional since pre-v1.0.55

Issue

The Claude Code VS Code extension has stopped functioning for versions 1.0.55 and later, preventing users from accessing Claude Code features through VS Code.

Steps to Reproduce

1. Install Claude Code VS Code extension
2. Use any version >= 1.0.55
3. Attempt to use extension features
4. Extension fails to initialize or respond

Expected Behavior

• Extension initializes on VS Code startup
• Features accessible through Command Palette
• Code completion and inline suggestions work
• CLI integration functions

Current Behavior

• Extension fails to load or remains non-functional
• No error messages in VS Code UI
• Extension icon grayed out
• Commands not available in Command Palette
• CLI integration features not detected

Environment

• VS Code: 1.85.0+
• Claude Code extension: >= 1.0.55
• OS: All platforms affected

Additional Context

• Affects all users on 1.0.55+
• Persists after reinstallation
• Independent of subscription tier

/label bug, severity:high, affects:extension