fix: distinguish HTML entities from literal characters in diff comparison

- Store original search/replace content before unescaping markers
- Compare original content to preserve HTML entity distinction
- Add comprehensive tests for HTML entity handling
- Fixes issue where < and < were incorrectly treated as identical

Fixes #7964

Author: roomote

src/core/diff/strategies/__tests__/html-entity-handling.spec.ts

@@ -0,0 +1,172 @@
+import { MultiSearchReplaceDiffStrategy } from "../multi-search-replace"
+
+describe("HTML entity handling", () => {
+	let strategy: MultiSearchReplaceDiffStrategy
+
+	beforeEach(() => {
+		strategy = new MultiSearchReplaceDiffStrategy()
+	})
+
+	it("should distinguish between HTML entities and their literal characters", async () => {
+		const originalContent = `.FilterBatch<int>(batch => batch.Count == 3)
+.MapBatch<int, int>(batch => batch.Sum())`
+
+		const diffContent = `
+<<<<<<< SEARCH
+.FilterBatch&lt;int&gt;(batch =&gt; batch.Count == 3)
+=======
+.FilterBatch<int>(batch => batch.Count == 3)
+>>>>>>> REPLACE
+
+<<<<<<< SEARCH
+.MapBatch&lt;int, int&gt;(batch =&gt; batch.Sum())
+=======
+.MapBatch<int, int>(batch => batch.Sum())
+>>>>>>> REPLACE`
+
+		const result = await strategy.applyDiff(originalContent, diffContent)
+		expect(result.success).toBe(true)
+		if (result.success) {
+			expect(result.content).toBe(`.FilterBatch<int>(batch => batch.Count == 3)
+.MapBatch<int, int>(batch => batch.Sum())`)
+		}
+	})
+
+	it("should not treat &lt; and < as identical in search/replace comparison", async () => {
+		const originalContent = `public List&lt;string&gt; GetItems() {
+    return new List&lt;string&gt;();
+}`
+
+		const diffContent = `
+<<<<<<< SEARCH
+public List&lt;string&gt; GetItems() {
+    return new List&lt;string&gt;();
+}
+=======
+public List<string> GetItems() {
+    return new List<string>();
+}
+>>>>>>> REPLACE`
+
+		const result = await strategy.applyDiff(originalContent, diffContent)
+		expect(result.success).toBe(true)
+		if (result.success) {
+			expect(result.content).toBe(`public List<string> GetItems() {
+    return new List<string>();
+}`)
+		}
+	})
+
+	it("should handle mixed HTML entities correctly", async () => {
+		const originalContent = `&lt;div class=&quot;container&quot;&gt;
+    &lt;p&gt;Hello &amp; welcome&lt;/p&gt;
+&lt;/div&gt;`
+
+		const diffContent = `
+<<<<<<< SEARCH
+&lt;div class=&quot;container&quot;&gt;
+    &lt;p&gt;Hello &amp; welcome&lt;/p&gt;
+&lt;/div&gt;
+=======
+<div class="container">
+    <p>Hello & welcome</p>
+</div>
+>>>>>>> REPLACE`
+
+		const result = await strategy.applyDiff(originalContent, diffContent)
+		expect(result.success).toBe(true)
+		if (result.success) {
+			expect(result.content).toBe(`<div class="container">
+    <p>Hello & welcome</p>
+</div>`)
+		}
+	})
+
+	it("should reject when search and replace are identical (including HTML entities)", async () => {
+		const originalContent = `function test<T>() {
+    return value;
+}`
+
+		// Both search and replace have the same content (literal angle brackets)
+		const diffContent = `
+<<<<<<< SEARCH
+function test<T>() {
+    return value;
+}
+=======
+function test<T>() {
+    return value;
+}
+>>>>>>> REPLACE`
+
+		const result = await strategy.applyDiff(originalContent, diffContent)
+		expect(result.success).toBe(false)
+		if (!result.success && result.error) {
+			expect(result.error).toContain("Search and replace content are identical")
+		}
+	})
+
+	it("should handle apostrophes and quotes with HTML entities", async () => {
+		const originalContent = `const message = &apos;It&apos;s a &quot;test&quot; message&apos;;`
+
+		const diffContent = `
+<<<<<<< SEARCH
+const message = &apos;It&apos;s a &quot;test&quot; message&apos;;
+=======
+const message = 'It\'s a "test" message';
+>>>>>>> REPLACE`
+
+		const result = await strategy.applyDiff(originalContent, diffContent)
+		expect(result.success).toBe(true)
+		if (result.success) {
+			expect(result.content).toBe(`const message = 'It\'s a "test" message';`)
+		}
+	})
+
+	it("should handle C# generics with escaped HTML entities", async () => {
+		const originalContent = `var dict = new Dictionary&lt;string, List&lt;int&gt;&gt;();
+dict.Add(&quot;key&quot;, new List&lt;int&gt; { 1, 2, 3 });`
+
+		const diffContent = `
+<<<<<<< SEARCH
+var dict = new Dictionary&lt;string, List&lt;int&gt;&gt;();
+dict.Add(&quot;key&quot;, new List&lt;int&gt; { 1, 2, 3 });
+=======
+var dict = new Dictionary<string, List<int>>();
+dict.Add("key", new List<int> { 1, 2, 3 });
+>>>>>>> REPLACE`
+
+		const result = await strategy.applyDiff(originalContent, diffContent)
+		expect(result.success).toBe(true)
+		if (result.success) {
+			expect(result.content).toBe(`var dict = new Dictionary<string, List<int>>();
+dict.Add("key", new List<int> { 1, 2, 3 });`)
+		}
+	})
+
+	it("should handle the exact issue from bug report", async () => {
+		const originalContent = `                    .FilterBatch&lt;int&gt;(batch =&gt; batch.Count == 3)
+                    .MapBatch&lt;int, int&gt;(batch =&gt; batch.Sum())`
+
+		// This is the exact diff that was failing before the fix
+		const diffContent = `
+<<<<<<< SEARCH
+                    .FilterBatch&lt;int&gt;(batch =&gt; batch.Count == 3)
+=======
+                    .FilterBatch<int>(batch => batch.Count == 3)
+>>>>>>> REPLACE
+
+<<<<<<< SEARCH
+                    .MapBatch&lt;int, int&gt;(batch =&gt; batch.Sum())
+=======
+                    .MapBatch<int, int>(batch => batch.Sum())
+>>>>>>> REPLACE`
+
+		const result = await strategy.applyDiff(originalContent, diffContent)
+		expect(result.success).toBe(true)
+		if (result.success) {
+			expect(result.content).toBe(`                    .FilterBatch<int>(batch => batch.Count == 3)
+                    .MapBatch<int, int>(batch => batch.Sum())`)
+		}
+	})
+})

src/core/diff/strategies/multi-file-search-replace.ts

@@ -492,6 +492,10 @@ Each file requires its own path, start_line, and diff elements.
 			let { searchContent, replaceContent } = replacement
 			let startLine = replacement.startLine + (replacement.startLine === 0 ? 0 : delta)
 
+			// Store original content for comparison before any transformations
+			const originalSearchContent = searchContent
+			const originalReplaceContent = replaceContent
+
 			// First unescape any escaped markers in the content
 			searchContent = this.unescapeMarkers(searchContent)
 			replaceContent = this.unescapeMarkers(replaceContent)
@@ -511,7 +515,8 @@ Each file requires its own path, start_line, and diff elements.
 			}
 
 			// Validate that search and replace content are not identical
-			if (searchContent === replaceContent) {
+			// Compare the original content to preserve HTML entities distinction
+			if (originalSearchContent === originalReplaceContent) {
 				diffResults.push({
 					success: false,
 					error:

src/core/diff/strategies/multi-search-replace.ts

@@ -409,6 +409,10 @@ Only use a single line of '=======' between search and replacement content, beca
 			let { searchContent, replaceContent } = replacement
 			let startLine = replacement.startLine + (replacement.startLine === 0 ? 0 : delta)
 
+			// Store original content for comparison before any transformations
+			const originalSearchContent = searchContent
+			const originalReplaceContent = replaceContent
+
 			// First unescape any escaped markers in the content
 			searchContent = this.unescapeMarkers(searchContent)
 			replaceContent = this.unescapeMarkers(replaceContent)
@@ -428,7 +432,8 @@ Only use a single line of '=======' between search and replacement content, beca
 			}
 
 			// Validate that search and replace content are not identical
-			if (searchContent === replaceContent) {
+			// Compare the original content to preserve HTML entities distinction
+			if (originalSearchContent === originalReplaceContent) {
 				diffResults.push({
 					success: false,
 					error: