[BUG] Edit diffs no longer open as VS Code diff editor tabs in v2.1.144 (regression)

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?

Prior to v2.1.144, with "Ask Before Edits" mode enabled, proposed file
changes opened as a side-by-side diff editor tab in VS Code's main panel.

After updating to v2.1.144, diffs appear inline in the chat panel instead.

Environment: VS Code extension v2.1.144, claudeCode.preferredLocation=panel,
Windows 11 Enterprise.

What Should Happen?

Expected: diff opens as VS Code diff editor in main panel (side-by-side).
Actual: diff appears inline in the Claude Code chat panel.

Error Messages/Logs

No error messages.

Steps to Reproduce

Requesting any changes with 'Ask before edits' set.

Claude Model

None

Is this a regression?

Yes, this worked in a previous version

Last Working Version

2.1.143

Claude Code Version

Version 1.6608.2 (ebf1a1)

Platform

Anthropic API

Operating System

Windows

Terminal/Shell

Terminal.app (macOS)

Additional Information

_No response_