[FEATURE] VS Code extension edits bypass the editor API, losing Timeline/Local History entries

Preflight Checklist

• [x] I have searched existing requests and this feature hasn't been requested yet
• [x] This is a single feature request (not multiple features)

Problem Statement

Claude Code's Edit tool writes directly to the filesystem rather than through VS Code's editor API. This means:

No entries are created in VS Code's Timeline/Local History
There is no way to diff intermediate states between AI edits within a session
Git diff only helps against committed state, not between successive AI-made changes

Proposed Solution

Expected behavior: edits should be routed through the VS Code workspace.applyEdit or TextDocument API so that each Claude Code edit creates a timeline entry, enabling the same auditability a user would have when editing manually.

Alternative Solutions

_No response_

Priority

Medium - Would be very helpful

Feature Category

File operations

Use Case Example

When ai makes edits and i want to see the changes at a different point in time to see the diff.

Additional Context

_No response_