[VS Code] Code generation (streaming) not working with VS Code version 1.97

Summary

VS Code introduced a breaking change in the last version (released Thursday last week). Code suggestions streaming stopped working in this version.

We introduced a hot fix to resolve 2025-02-10: Code generation broken in a new ver... (gitlab-com/gl-infra/production#19268 - closed): fix: disable Duo CS streaming for VS Code 1.97.... (!2371 - merged)

Now this issue represents an effort to find and fix the root cause of the issue.

Steps to reproduce

1. update vscode to be 1.97.0
2. ensure access token has access to code suggestions
3. create new file try to get a code suggestion

What is the current bug behavior?

csvscode1970

What is the expected correct behavior?

Code suggestion generated

Relevant logs and/or screenshots

Possible fixes