Having a deeper integration with the editor allows for some really nice paradigms: - Rollbacks feel more native, in the sense that I do not loose my undo or redo stack - cmd+k is more in line with what you would expect with a floating widget for input instead of it being shown at the very top of your screen which is the case with any extension for now.
Going further, the changes which Microsoft are making to enable copilot editing features are only open to "copilot-chat" and no other extension (fair game for Microsoft IMHO) So keeping these things in mind, we designed the architecture in a way that we can go towards any interface (editor/extension). We did put energy into making this work deeply with the VSCode ecosystem of APIs and also added our own.
If the editor does not work to our benefit, we will take a call on moving to a different interface and thats where an extension or cloud based solution might also make sense
I have attached a screenshot of an updated design for the Navbar component. My local dev server is running at localhost:3000. Update the component to match the new designs and double check your changes after save.