[UI Bug] Large markdown paste causes conversation overlap + no collapsible 'Show more' on chat bubbles (VS Code Extension)

Bug Report

Environment: Claude Code VS Code Extension

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Bug 1 — Conversation Overlap on Large Markdown Paste

When a large markdown block is pasted into the chat, bubbles visually overlap each other. Text from one bubble renders on top of the next message, making the conversation unreadable.

Bug 2 — No Collapsible 'Show more' on Long Chat Bubbles

Long chat bubbles (especially with markdown — headers, bullets, code blocks) have no collapse affordance. The result is an extremely long scroll with no way to minimize past responses. The web UI has a 'Show more / Show less' pattern — the VS Code extension is missing this entirely.

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Steps to Reproduce

1. Open Claude Code in VS Code
2. Paste a large markdown text block (50+ lines with headers, bullets, code blocks)
3. Observe chat bubbles overlapping in the conversation view
4. Notice there is no 'Show more' / collapse option on long bubbles

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Expected Behavior

• Bubbles should be properly spaced with no visual overlap
• Long content should have a 'Show more' collapse affordance (consistent with web UI)

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Impact

• Conversation becomes unreadable after large pastes
• No way to navigate past long responses without excessive scrolling
• Degrades UX significantly for power users working with markdown-heavy content

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cc @bcherny @ant-kurt @bogini @ashwin-ant @fvolcic @ThariqS @catherinewu @dhollman @ddworken