Hey, here are a few things worth checking to narrow this down:
Which Dev Containers extension do you have installed? You need anysphere.remote-containers, not the Microsoft one ms-vscode-remote.remote-containers. If you have the MS version, uninstall it, install the Anysphere one, and restart Cursor.
Can you share the full Dev Containers logs? Open View > Output, then pick Dev Containers from the dropdown. The error you shared doesn’t show what actually failed during the Docker Compose build.
Does this same devcontainer config work in VS Code right now?
What version were you on before the update? You mentioned “AGAIN” so when was the last time it worked for you?
Quick thing to try: open the Command Palette Ctrl+Shift+P and run Dev Containers: Rebuild Without Cache and Reopen in Container. This has helped some users with similar Docker Compose build failures.