The "Compaction" Update has rendered VS Code Agents non-functional

[YIM-boss]

🏷️ Discussion Type

Product Feedback

💬 Feature/Topic Area

Copilot in GitHub

Body

I am writing this because the recent changes to context compaction have effectively lobotomized the VS Code agents. What used to be a semi-reliable pair programmer has been reduced to a single-turn task runner with the memory of a goldfish.

The current state of "compaction" is a disaster for any real-world workflow. After just a few exchanges, the agent:
Goes totally blind: It loses track of the very file structures and variable names we were discussing two minutes prior.
Becomes directionless: It forgets the overarching goal of the session, requiring me to manually re-explain the entire context every three prompts.

Hallucinates legacy state: Because the "compacted" summary is so vague, the agent starts guessing and inventing logic that doesn't exist in the current codebase.

This isn't "optimization"—it's a massive regression. We are paying for "agents," not "single-task bots." If the goal was to save on token costs by sacrificing the entire utility of the tool, you’ve succeeded.

Is there a way to opt-out of this aggressive summarization, or do we just have to wait for a competitor to provide an agent that can actually remember a conversation?

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