Cursor Agent Replaces "<Error>" with "<e>" When Reading File Contents

:lady_beetle: Description: When Cursor’s AI agent reads any file containing the text , it incorrectly displays it as in its responses. This happens regardless of file type - occurring in XML files, source code (like Rust with vector). The source files themselves remain unaltered, but the agent’s output consistently shows this substitution

:counterclockwise_arrows_button: Steps to reproduce:

  1. Ask the agent to create any file containing the text (such as an S3 response XML or Rust code)
  2. Request the agent to read that file and output its contents
  3. Observe that all instances of have been replaced with in the agent’s output, though the actual file content is correct

:camera: Screenshot:

:laptop: Environment:
Version: 0.47.5 (user setup)
VSCode Version: 1.96.2
Commit: 53d6da1322f934a1058e7569ee0847b24879d180
Date: 2025-03-14T21:53:57.982Z
Electron: 32.2.6
Chromium: 128.0.6613.186
Node.js: 20.18.1
V8: 12.8.374.38-electron.0
OS: Windows_NT x64 10.0.26100

:prohibited: Impact: Critical for developers working with S3 API implementations. Forces non-standard XML formatting that would break AWS compatibility, making Cursor unusable for S3 XML development without complex workarounds.

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