[Bug] Chat line history truncated to 3–4 messages and rendering unescaped HTML entities (` `)

What version of the IDE extension are you using?

26.818.41509

What subscription do you have?

PRO

Which IDE are you using?

VS Code

What platform is your computer?

Macbook PRO Silicon

What issue are you seeing?

Environment / Extension Info:

• Identifier: openai.chatgpt
• Version: 26.818.41509 (Updated ~15 hours ago)

Severity: Medium / High

Description:
When using the Up and Down arrow keys to cycle through previously sent messages in the chat input line, the line history buffer is limited to only 3–4 previous messages. Additionally, inline whitespace in recalled history is being converted into raw, unescaped HTML entities ( ).

What steps can reproduce the bug?

Steps to Reproduce:

1. Open the chat interface with the specified extension enabled.
2. Send 6–10 consecutive text messages (e.g., "Message 1", "Message 2", etc.).
3. Place focus on the chat input field.
4. Press the Up Arrow key repeatedly to traverse backward through the message history.
5. Observe the retrieved messages and text encoding in the input field.

What is the expected behavior?

Expected Behavior:

• The input field should buffer and cycle through a complete history (e.g., last 20+ messages or full session history).
• Text should render as plain text without exposed HTML entities.

Actual Behavior:

• Input history stops retrieving messages after 3 to 4 key presses.
• Spaces within recalled messages render as raw   entities (e.g., Hello World).

Additional information

No response

Start by reproducing the issue in the VS Code chat interface with 6–10 messages and repeated Up Arrow presses. Trace the chat input history handling and the path that renders recalled text, checking both the history limit and conversion of spaces to HTML entities. Done means longer history is accessible and recalled messages display plain text.