FWIW, Edit mode gives the impression of doing this, vs. originally only passing the context visible from the open window.

You can choose files to include and they don't appear to be truncated in any way. Though to be fair, I haven't checked the network traffic, but it appears to operate in this fashion from day to day use.

I’d be curious to hear what actually goes through the network request.

i will try again but last i tried adding folder to edit mode and asking it to list down files it sees, it didn't list them all down.