Git diff view does not show untracked nested repositories, but will commit them

[kryops]

Issue Type: Bug

VS Code does not show untracked nested Git repositories it in the "Source Control" panel's diff view, but will add them to a commit using the "Commit" button, or stage them using the "Stage All Changes" button.

In my case I wanted to add an external repository into my yarn workspace for development, but added it to my .gitignore incorrectly, which made me accidentally commit it because it did not show up in VS Code's diff view.

Steps to reproduce:

• Clone a Git repository and open it in VS Code
• Optional: Make changes to a file
• Clone a nested repository into a subfolder

Expected result:

• The "Source Control" view shows both the edited file and the untracked nested repository

Actual result:

1. Only the changes to the edited file are displayed in the "Source Control" view

2. When committing all changes by pressing the "Commit" button at the top of the "Source Control" view, the nested repository is committed as well

> git diff HEAD^1

...

diff --git a/packages/test b/packages/test
new file mode 160000
index 000000000..edcb146c9
--- /dev/null
+++ b/packages/test
@@ -0,0 +1 @@
+Subproject commit edcb146c9d9904038f83a7020a802cd6b8212d3b

3. Only after the nested repository is committed, The "Source Control" view starts displaying changes made to it

Side Notes:

• The nested repository is displayed in the "Staged Changes" diff view when the "Stage All Changes" button is clicked or it is added via git add through the shell. This bug only seems to affect nested repositories that are untracked.
• The Git command line warns about adding nested repositories that are not proper submodules. Maybe VS Code should add a warning in these cases as well?

> git add packages/test

warning: adding embedded git repository: packages/test
hint: You've added another git repository inside your current repository.
hint: Clones of the outer repository will not contain the contents of
hint: the embedded repository and will not know how to obtain it.
hint: If you meant to add a submodule, use:
hint: 
hint:   git submodule add <url> packages/test
hint: 
hint: If you added this path by mistake, you can remove it from the
hint: index with:
hint: 
hint:   git rm --cached packages/test
hint: 
hint: See "git help submodule" for more information.

Related: #37947

VS Code version: Code 1.32.3 (a3db5be, 2019-03-14T22:46:48.547Z)
OS version: Darwin x64 18.5.0

System Info

Item	Value
CPUs	Intel(R) Core(TM) i5-8259U CPU @ 2.30GHz (8 x 2300)
GPU Status	2d_canvas: enabled checker_imaging: disabled_off flash_3d: enabled flash_stage3d: enabled flash_stage3d_baseline: enabled gpu_compositing: enabled multiple_raster_threads: enabled_on native_gpu_memory_buffers: enabled rasterization: enabled surface_synchronization: enabled_on video_decode: enabled webgl: enabled webgl2: enabled
Load (avg)	2, 2, 2
Memory (System)	16.00GB (4.18GB free)
Process Argv	-psn_0_77843
Screen Reader	no
VM	0%

• Tried with extensions disabled

[vscodebot]

(Experimental duplicate detection)
Thanks for submitting this issue. Please also check if it is already covered by an existing one, like:

• Git repository within git repository not showing in Source Control (#41417)

[kryops]

(not a duplicate as this issue is not about showing the nested repository as a SCM provider, but rather the diff it causes to the parent repository)

[joaomoreno]

#37947