diff --git a/crates/openfang-kernel/src/kernel.rs b/crates/openfang-kernel/src/kernel.rs
index 5e582d04..d5682065 100644
--- a/crates/openfang-kernel/src/kernel.rs
+++ b/crates/openfang-kernel/src/kernel.rs
@@ -1085,7 +1085,11 @@ impl OpenFangKernel {
                                             || disk_manifest.model.model
                                                 != entry.manifest.model.model
                                             || disk_manifest.capabilities.tools
-                                                != entry.manifest.capabilities.tools;
+                                                != entry.manifest.capabilities.tools
+                                            || disk_manifest.tool_allowlist
+                                                != entry.manifest.tool_allowlist
+                                            || disk_manifest.tool_blocklist
+                                                != entry.manifest.tool_blocklist;
                                         if changed {
                                             info!(
                                                 agent = %name,
@@ -4738,6 +4742,17 @@ impl OpenFangKernel {
                 McpTransportEntry::Sse { url } => McpTransport::Sse { url: url.clone() },
             };
 
+            // Resolve env vars from vault/dotenv before passing to MCP subprocess.
+            // The MCP spawn calls env_clear() then re-adds only whitelisted vars
+            // from std::env — so we must ensure they're in std::env first.
+            for var_name in &server_config.env {
+                if std::env::var(var_name).is_err() {
+                    if let Some(val) = self.resolve_credential(var_name) {
+                        std::env::set_var(var_name, &val);
+                    }
+                }
+            }
+
             let mcp_config = McpServerConfig {
                 name: server_config.name.clone(),
                 transport,
diff --git a/crates/openfang-runtime/src/agent_loop.rs b/crates/openfang-runtime/src/agent_loop.rs
index 2fd481d6..9fc0c736 100644
--- a/crates/openfang-runtime/src/agent_loop.rs
+++ b/crates/openfang-runtime/src/agent_loop.rs
@@ -244,7 +244,9 @@ pub async fn run_agent_loop(
     }
 
     // Build the messages for the LLM, filtering system messages
-    // System prompt goes into the separate `system` field
+    // System prompt goes into the separate `system` field.
+    // NOTE: We build llm_messages BEFORE stripping images so the LLM
+    // sees the full image data for the current turn.
     let llm_messages: Vec<Message> = session
         .messages
         .iter()
@@ -252,6 +254,23 @@ pub async fn run_agent_loop(
         .cloned()
         .collect();
 
+    // Strip Image blocks from session to prevent base64 bloat.
+    // The LLM already received them via llm_messages above.
+    for msg in session.messages.iter_mut() {
+        if let MessageContent::Blocks(blocks) = &mut msg.content {
+            let had_images = blocks.iter().any(|b| matches!(b, ContentBlock::Image { .. }));
+            if had_images {
+                blocks.retain(|b| !matches!(b, ContentBlock::Image { .. }));
+                if blocks.is_empty() {
+                    blocks.push(ContentBlock::Text {
+                        text: "[Image processed]".to_string(),
+                        provider_metadata: None,
+                    });
+                }
+            }
+        }
+    }
+
     // Validate and repair session history (drop orphans, merge consecutive)
     let mut messages = crate::session_repair::validate_and_repair(&llm_messages);
 
@@ -421,7 +440,7 @@ pub async fn run_agent_loop(
                 // One-shot retry: if the LLM returns empty text with no tool use,
                 // try once more before accepting the empty result.
                 // Triggers on first call OR when input_tokens=0 (silently failed request).
-                if text.trim().is_empty() && response.tool_calls.is_empty() {
+                if text.trim().is_empty() && response.tool_calls.is_empty() && !response.has_any_content() {
                     let is_silent_failure =
                         response.usage.input_tokens == 0 && response.usage.output_tokens == 0;
                     if iteration == 0 || is_silent_failure {
@@ -1221,6 +1240,23 @@ pub async fn run_agent_loop_streaming(
         .cloned()
         .collect();
 
+    // Strip Image blocks from session to prevent base64 bloat.
+    // The LLM already received them via llm_messages above.
+    for msg in session.messages.iter_mut() {
+        if let MessageContent::Blocks(blocks) = &mut msg.content {
+            let had_images = blocks.iter().any(|b| matches!(b, ContentBlock::Image { .. }));
+            if had_images {
+                blocks.retain(|b| !matches!(b, ContentBlock::Image { .. }));
+                if blocks.is_empty() {
+                    blocks.push(ContentBlock::Text {
+                        text: "[Image processed]".to_string(),
+                        provider_metadata: None,
+                    });
+                }
+            }
+        }
+    }
+
     // Validate and repair session history (drop orphans, merge consecutive)
     let mut messages = crate::session_repair::validate_and_repair(&llm_messages);
 
@@ -1408,7 +1444,7 @@ pub async fn run_agent_loop_streaming(
                 // One-shot retry: if the LLM returns empty text with no tool use,
                 // try once more before accepting the empty result.
                 // Triggers on first call OR when input_tokens=0 (silently failed request).
-                if text.trim().is_empty() && response.tool_calls.is_empty() {
+                if text.trim().is_empty() && response.tool_calls.is_empty() && !response.has_any_content() {
                     let is_silent_failure =
                         response.usage.input_tokens == 0 && response.usage.output_tokens == 0;
                     if iteration == 0 || is_silent_failure {
diff --git a/crates/openfang-runtime/src/llm_driver.rs b/crates/openfang-runtime/src/llm_driver.rs
index 9178be9d..8fb59405 100644
--- a/crates/openfang-runtime/src/llm_driver.rs
+++ b/crates/openfang-runtime/src/llm_driver.rs
@@ -93,6 +93,17 @@ impl CompletionResponse {
             .collect::<Vec<_>>()
             .join("")
     }
+
+    /// Check if the response has any meaningful content (including Thinking blocks).
+    /// Used to distinguish true empty responses from thinking-only responses.
+    pub fn has_any_content(&self) -> bool {
+        self.content.iter().any(|block| match block {
+            ContentBlock::Text { text, .. } => !text.is_empty(),
+            ContentBlock::Thinking { thinking, .. } => !thinking.is_empty(),
+            ContentBlock::ToolUse { .. } | ContentBlock::Image { .. } => true,
+            _ => false,
+        })
+    }
 }
 
 /// Events emitted during streaming LLM completion.