diff --git a/src/api/providers/vscode-lm.ts b/src/api/providers/vscode-lm.ts
index 4d2c6791bfb..8a303a767f4 100644
--- a/src/api/providers/vscode-lm.ts
+++ b/src/api/providers/vscode-lm.ts
@@ -111,6 +111,13 @@ export class VsCodeLmHandler extends BaseProvider implements SingleCompletionHan
 	 */
 	async createClient(selector: vscode.LanguageModelChatSelector): Promise<vscode.LanguageModelChat> {
 		try {
+			// Check if vscode.lm API is available
+			if (!vscode.lm) {
+				throw new Error(
+					"VS Code Language Model API is not available. The vscode-lm provider can only be used within VS Code extension, not in CLI.",
+				)
+			}
+
 			const models = await vscode.lm.selectChatModels(selector)
 
 			// Use first available model or create a minimal model object
@@ -565,6 +572,12 @@ const VSCODE_LM_STATIC_BLACKLIST: string[] = ["claude-3.7-sonnet", "claude-3.7-s
 
 export async function getVsCodeLmModels() {
 	try {
+		// Check if vscode.lm API is available
+		if (!vscode.lm) {
+			console.warn("VS Code Language Model API is not available.")
+			return []
+		}
+
 		const models = (await vscode.lm.selectChatModels({})) || []
 		return models.filter((model) => !VSCODE_LM_STATIC_BLACKLIST.includes(model.id))
 	} catch (error) {
diff --git a/src/core/diff/strategies/multi-search-replace.ts b/src/core/diff/strategies/multi-search-replace.ts
index a6a9913203c..e97724ad7fb 100644
--- a/src/core/diff/strategies/multi-search-replace.ts
+++ b/src/core/diff/strategies/multi-search-replace.ts
@@ -298,7 +298,9 @@ Only use a single line of '=======' between search and replacement content, beca
 							? reportInvalidDiffError(SEP, SEARCH)
 							: reportMergeConflictError(SEP, SEARCH)
 					if (marker === REPLACE) return reportInvalidDiffError(REPLACE, SEARCH)
-					if (marker.startsWith(REPLACE_PREFIX)) return reportMergeConflictError(marker, SEARCH)
+					// Only report merge conflict error if not the exact REPLACE closing marker
+					if (marker.startsWith(REPLACE_PREFIX) && marker !== REPLACE)
+						return reportMergeConflictError(marker, SEARCH)
 					if (SEARCH_PATTERN.test(marker)) state.current = State.AFTER_SEARCH
 					else if (marker.startsWith(SEARCH_PREFIX)) return reportMergeConflictError(marker, SEARCH)
 					break
@@ -307,7 +309,9 @@ Only use a single line of '=======' between search and replacement content, beca
 					if (SEARCH_PATTERN.test(marker)) return reportInvalidDiffError(SEARCH_PATTERN.source, SEP)
 					if (marker.startsWith(SEARCH_PREFIX)) return reportMergeConflictError(marker, SEARCH)
 					if (marker === REPLACE) return reportInvalidDiffError(REPLACE, SEP)
-					if (marker.startsWith(REPLACE_PREFIX)) return reportMergeConflictError(marker, SEARCH)
+					// Only report merge conflict error if not the exact REPLACE closing marker
+					if (marker.startsWith(REPLACE_PREFIX) && marker !== REPLACE)
+						return reportMergeConflictError(marker, SEARCH)
 					if (marker === SEP) state.current = State.AFTER_SEPARATOR
 					break
 
diff --git a/src/core/prompts/sections/skills.ts b/src/core/prompts/sections/skills.ts
index a05c0aea738..0451a9498ca 100644
--- a/src/core/prompts/sections/skills.ts
+++ b/src/core/prompts/sections/skills.ts
@@ -1,15 +1,29 @@
+import * as os from "os"
+import * as path from "path"
 import { SkillsManager, SkillMetadata } from "../../../services/skills/SkillsManager"
 
 /**
- * Get a display-friendly relative path for a skill.
+ * Get a display-friendly path for a skill.
  * Converts absolute paths to relative paths to avoid leaking sensitive filesystem info.
  *
+ * For global skills, uses the actual home directory path (not ~) to ensure
+ * the path works correctly when the AI model tries to read the file on all platforms.
+ *
  * @param skill - The skill metadata
- * @returns A relative path like ".kilocode/skills/name/SKILL.md" or "~/.kilocode/skills/name/SKILL.md"
+ * @returns A path like ".kilocode/skills/name/SKILL.md" or "C:/Users/john/.kilocode/skills/name/SKILL.md"
  */
 function getDisplayPath(skill: SkillMetadata): string {
-	const basePath = skill.source === "project" ? ".kilocode" : "~/.kilocode"
 	const skillsDir = skill.mode ? `skills-${skill.mode}` : "skills"
+
+	if (skill.source === "project") {
+		return `.kilocode/${skillsDir}/${skill.name}/SKILL.md`
+	}
+
+	// For global skills, use the actual home directory path instead of ~
+	// This ensures the path works correctly when the AI model tries to read the file
+	// on all platforms, especially Windows where ~ is not automatically expanded
+	const homeDir = os.homedir()
+	const basePath = path.join(homeDir, ".kilocode")
 	return `${basePath}/${skillsDir}/${skill.name}/SKILL.md`
 }