GitHub Copilot Chat stuck on "Activating MCP extensions..." indefinitely despite successful authentication (VS Code 1.130.0)

Does this issue occur when all extensions are disabled?: No (GitHub Copilot Chat is a built-in VS Code component and the issue persists.)
No (GitHub Copilot Chat is required to reproduce the issue)

- VS Code Version:
Version: 1.130.0 (system setup)
Commit: 1b6a188127eeaf9194f945eb6eb89a657e93c54c
Electron: 42.6.0
OS: Windows 11 (10.0.22000)

- OS Version:
Windows 11 21H2 (Build 22000)

## Steps to Reproduce

1. Open VS Code 1.130.0.
2. Sign in to GitHub.
3. Open GitHub Copilot Chat.
4. Ask any prompt.

## Expected Result

GitHub Copilot Chat initializes normally and responds.

## Actual Result

Copilot Chat remains stuck on "Activating MCP extensions..." and "Evaluating..." indefinitely. No response is ever generated.

## Additional Information

I collected extensive diagnostics before filing this issue:

- GitHub authentication succeeds.
- GitHub Copilot token is successfully acquired.
- Student entitlement is active.
- All GitHub/Copilot network requests return HTTP 200.
- MCP registry initializes successfully.
- Extension Host remains healthy (no crashes or high CPU usage).
- GitHub Copilot Chat log ends immediately after successful authentication with no errors.
- Running Extensions shows "GitHub Copilot Chat" stuck in "Activating..." indefinitely.
- The issue persists after restarting VS Code and also with a fresh VS Code user profile.

Relevant Copilot log:

Logged in as
Using the Electron fetcher.
Got Copilot token.
AuthenticationService: Has token: true
Finished handling auth change event.

No errors are reported after successful authentication.

From the collected diagnostics, the authentication and network layers appear to work correctly. The failure seems to occur after authentication, when VS Code attempts to initialize the Copilot Chat session.