Thanks for the extra info.
It looks like this is a known bug in Cursor’s built-in node-pty (v1.1.0-beta42). The same root cause is described here: Terminal paste truncation at ~1018 bytes. In that case it shows up as “silent” truncation. In your case it turns into a full hang because Claude Code uses the PTY in raw mode (Ink TUI), so a write error becomes a freeze instead of an unnoticed data loss.
Your debugging confirms this perfectly. The 1 018-byte boundary in ptyhost.log and the 99,5% idle time in the Claude Code process point straight at the PTY layer.
The team is aware. There’s no ETA yet, but your report helps with prioritization since it shows a more severe symptom than what was previously known.
Unfortunately there’s no in-app workaround. For now the most reliable option is to use an external terminal (iTerm2, Terminal.app, etc.) when you need to paste a large block of text into Claude Code.