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[Feature] Add file URI handling and remove focused test #2603

@EmmaYuan1015

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@EmmaYuan1015

This addresses the issue where VSIX build/smoke tests might use file:// URIs as the path input in certain environments, causing file system operations like fs.existsSync to fail to handle them correctly. It also removes erroneously committed focused tests (it.only) to prevent CI from executing only a single test case and skipping other tests.

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