[BUG] new VS Code extention doesn't use the current folder path to open claude code

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?

new VS Code extension doesn't use the current folder path to open claude code unlike old claude code vs extension. I try to set CWD but it doesn't work.

What Should Happen?

When vs code extension is open, the claude code should start at what ever folder user open it as. It help with Monorepo.

Or it can hornor cwd setting in vscode

Error Messages/Logs

Steps to Reproduce

1. Open VS code claude extension at any sub folder
2. It will always start at same path

Claude Model

Sonnet (default)

Is this a regression?

No, this never worked

Last Working Version

_No response_

Claude Code Version

2.0

Platform

Anthropic API

Operating System

macOS

Terminal/Shell

Terminal.app (macOS)

Additional Information

_No response_