Hey, thanks for the report.
This is a known issue with BYOK Agent Mode for the Azure and Databricks providers. Cursor sends requests in a format that isn’t compatible with the standard API. It uses the wrong tools schema for file operations.
Similar issue: Cursor Agent Mode cannot modify files when using Azure-deployed GPT-5 mini (communication works but no file editing)
The team is working on improving BYOK support. A related bug was recently fixed for Azure GPT-5, but the issue still remains for Claude via Databricks.
Could you also share your current Cursor version (Help > About Cursor > Copy)?