VSCode extension: assistant tool calls rendered as literal text in chat, not executed

Environment: Claude Code VSCode extension on Windows 11.

Problem: During a session the assistant began emitting tool invocations as literal text in the chat (lines starting with 'call' followed by '<invoke name=...>' and '<parameter ...>' tags) instead of actually executing the tools. The XML-like tool-call markup appeared as visible chat content, and the underlying Bash/Edit operations were never run. The user saw raw invoke/parameter tags in the conversation, and requested file operations (delete/move) silently did nothing despite the assistant reporting success.

Expected: Tool calls should be executed by the harness, never surfaced as literal text to the user.

Impact: Destructive/file operations appeared to succeed in the assistant narration but did not execute, causing confusion and repeated failed attempts.