[Remote Tunnel Bug]: Terminal renders multi-byte UTF-8 as Latin-1 (double-encoding in clipboard)

VS Code version: 1.124.2
Extension: Remote Tunnels
OS (local): Ubuntu 24.04, Wayland
OS (remote): Ubuntu 24.04

Bug

In VS Code Remote Tunnel integrated terminal, multi-byte UTF-8 sequences are
rendered as individual Latin-1 code points. Bytes flow correctly to the shell
(bash receives correct input), but xterm.js displays each byte as a separate
character.

Clipboard copies of the garbled display produce double-encoded UTF-8.

Reproduction

On remote machine inside tmux (set-clipboard external):

printf 'test ● hello ❯ end' | tmux load-buffer -
tmux show-buffer | xxd | head
# Correct: e2 97 8f (●), e2 9d af (❯)

Check local clipboard after tmux copy:
wl-paste | xxd | head
# Garbled: c3 a2 c2 97 c2 8f (double-encoded ●), c3 a2 c2 9d c2 af (double-encoded ❯)

Terminal also visually displays â?? instead of ●.

Expected

Terminal renders UTF-8 sequences correctly. Clipboard contains e2 97 8f, not c3 a2 c2 97 c2 8f.

Notes

- Worked before ~June 10 2026
- tmux buffer bytes are correct — corruption introduced by VSCode's pty→xterm.js layer
- Does NOT reproduce in external terminal (ssh via gnome-terminal)

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