Chat: Use the local harness by default in Remote Repositories workspaces

[roblourens]

Problem

When a repository is opened through the Remote Repositories extension (vscode-vfs), the Agent Host harness cannot operate against the virtual workspace. Editor chat harness settings can nevertheless hide the Local harness or make Agent Host Copilot the default, leaving the workspace on a harness that does not work for this scenario.

Expected behavior

• The Local harness remains available in Remote Repositories and other fully virtual workspaces, regardless of chat.editor.localAgent.enabled.
• New chats default to the Local harness in a fully virtual workspace, even when Agent Host is enabled and chat.defaultToCopilotHarness is enabled.
• Non-virtual editor windows continue honoring the existing Agent Host and default-harness settings.

Reproduction

1. Enable Agent Host and configure Agent Host Copilot as the default editor chat harness.
2. Open a repository with the Remote Repositories extension.
3. Start a new chat session.

The Agent Host harness is selected even though Local is the harness that works with the virtual workspace.

Related changes

• #325835 keeps Local available in virtual workspaces.
• #326458 makes Local the default in virtual workspaces.

(Written by Copilot)

[Giuspepe]

Local does show up as option even when disabled through chat.editor.localAgent.enabled, however it is not selected as default in a virtual workspace; I need to select it manually.

Screen.Recording.2026-07-20.at.11.18.39.mov

Version: 1.130.0-insider
Commit: e586b8a
Date: 2026-07-20T04:43:17Z
Electron: 42.6.0
ElectronBuildId: 14623276
Chromium: 148.0.7778.280
Node.js: 24.18.0
V8: 14.8.178.38-electron.0
OS: Darwin arm64 25.5.0