Directory sync now runs git with a cleaned environment, meaning it strips the environment variables git would otherwise pick up. It also needs git 2.32 or newer, because that version can be told to ignore your personal git configuration. If git is older, or its version cannot be read, sync reports that it "is older than 2.32, or its version could not be read".
There are new reasons sync gives when it cannot use git normally:
volume_in_reach, about a volume within the area sync coversold_git, when git is older than 2.32- a case where your home directory is itself a git checkout
The usage report sent to Anthropic when git is not found on the starting path also records more details.
In cloud sessions, sync could skip reading git without saying so when git was too old. If you rely on it, check that your git is 2.32 or newer.
How many setups actually run git through this cleaned, version-checked path is not clear.