Includes inside #ifndef include guard are not supported, causing a include error

Repro:
Create file Db.h in root of the current workspace. Verify capitalization (in case you’re using a filesystem which is case sensitive, such as in Linux.) In another cpp file, include a #ifndef include guard.

Code for copy/paste:

#ifndef DB_H
#include "Db.h"   // <-- this include guard is to avoid circular dependency, but flags an error in the include path.
#endif 
#include "Db.h"

Potential issue:
Includes inside #ifndef include guard are not supported, causing a include error

Expected:
The include guard either is true or false, if true it should include (as file exists with the same name in the same capitalization,) if false it should not include.

Actual:
Red squggleys show the file is not found. However, if you include it without the include guard, it shows the include without error.

Steps taken:
Research with AI to detemine if this prepro directive is proprietary and not supported by cursor.
Verify file exists.
Verify filename case of file.
Insert direct #include without #ifndef, observed no error finding file in intellisense.