[BUG] VSCode extension for Claude: mode selection has no effect on current session

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?

<img width="710" height="107" alt="Image" src="https://github.com/user-attachments/assets/6d098901-e49a-4c3f-9084-ff6e441d9041" />
Mode is auto (from settings.json) even though I set it to Manual for this session. The mode setting is ignored.

What Should Happen?

When set to Manual mode, Claude should prompt me for approval for all changes.

Error Messages/Logs

Steps to Reproduce

1. new session in vscode
2. change to manual
3. prompt to make a change

Claude Model

Sonnet (default)

Is this a regression?

Yes, this worked in a previous version

Last Working Version

_No response_

Claude Code Version

2.1.209 (Claude Code)

Platform

Anthropic API

Operating System

macOS

Terminal/Shell

Terminal.app (macOS)

Additional Information

_No response_