This is a known bug class. Your shim test nailing it down to “rg never spawned” is the key diagnostic - the agent’s indexed search path returns a valid empty result, so the ripgrep fallback never triggers.
Immediate fix: Open Cursor Settings and search for “Index Repositories for Instant Grep” - disable it, then reload the window (Cmd+Shift+P > Developer: Reload Window). This forces the agent to use direct ripgrep instead of the indexed path, and should restore Grep/Glob immediately.
The most common root cause for the index returning empty in single-root repos: a .git directory in a parent of your workspace (e.g., ~/.git for dotfiles versioning). Since your workspace is under your homedir, if you version dotfiles with git, the indexed search builds its file tree from the parent repo — which doesn’t track your project files — and returns “0 matches” for everything.
Could you check:
ls -d ~/.git ~/phacet/.git ~/phacet/devenv/.git 2>/dev/null
If a parent .git is the cause, the longer-term fix is switching to a bare-repo dotfiles setup (no ~/.git directory). That way you can re-enable the indexed grep for the speed benefit.
You may also find this related thread helpful — same symptoms, same confirmed root cause.