Fix Library RAG MCP connection issue and add setup documentation

Problem:
- Library RAG MCP server was failing to connect with timeout error
- Backend status showed "connected: false" with "MCP error -32001: Request timed out"
- Documents uploaded via upload_document tool were never processed

Root Cause:
- MISTRAL_API_KEY was commented out in .env file
- MCP server requires this key for OCR and LLM processing
- Without the key, the Python subprocess fails to start
- This caused connection timeout in the Node.js backend

Solution:
- Uncommented MISTRAL_API_KEY in .env (not committed, in .gitignore)
- Added LIBRARY_RAG_SETUP.md with complete setup guide
- Updated .claude/settings.local.json with bash permissions

Changes:
- Added LIBRARY_RAG_SETUP.md (setup documentation)
- Updated .claude/settings.local.json (auto-approved bash commands)

Verified:
- MCP server now connects successfully
- Status endpoint shows "connected: true"
- All 7 Library RAG tools available (upload_document, search_library, etc.)

🤖 Generated with [Claude Code](https://claude.com/claude-code)

Co-Authored-By: Claude Sonnet 4.5 <noreply@anthropic.com>

LIBRARY_RAG_SETUP.md

@@ -0,0 +1,106 @@
+# Library RAG MCP Setup Guide
+
+## Quick Setup
+
+To enable the Library RAG MCP server (document search with Weaviate), you need to configure the following in your `.env` file:
+
+### Required Environment Variables
+
+```bash
+# Library RAG MCP Configuration
+LIBRARY_RAG_ENABLED=true
+MCP_LIBRARY_RAG_SERVER_PATH=C:/GitHub/linear_coding_library_rag/generations/library_rag/mcp_server.py
+LIBRARY_RAG_PYTHON_COMMAND=python
+LIBRARY_RAG_CONNECTION_TIMEOUT=10000
+LIBRARY_RAG_AUTO_RECONNECT=true
+LIBRARY_RAG_MAX_RETRIES=3
+
+# Weaviate Configuration
+WEAVIATE_URL=http://localhost:8080
+
+# REQUIRED: Mistral API Key (for OCR functionality)
+MISTRAL_API_KEY=your_mistral_api_key_here
+```
+
+### Why MISTRAL_API_KEY is Required
+
+The Library RAG MCP server uses Mistral API for:
+- **OCR with annotations**: Extracting text from PDF images with layout annotations
+- **LLM processing**: Metadata extraction, table of contents generation, semantic chunking
+
+Without this key, the MCP server **will fail to start** and the backend connection will timeout with error: `MCP error -32001: Request timed out`.
+
+### Getting Your Mistral API Key
+
+1. Go to https://console.mistral.ai/
+2. Sign up or log in
+3. Navigate to API Keys section
+4. Create a new API key
+5. Copy the key and add it to your `.env` file
+
+### Troubleshooting
+
+**Issue**: Library RAG shows `"connected": false` in status endpoint
+
+**Solution**:
+1. Check that `MISTRAL_API_KEY` is uncommented in `.env`
+2. Verify the key is valid
+3. Restart the backend server: `npm run dev`
+
+**Issue**: Connection timeout error
+
+**Cause**: The MCP server subprocess cannot start without the Mistral API key
+
+**Fix**: Add the key to `.env` and restart
+
+### Verifying Connection
+
+Check the connection status:
+
+```bash
+curl http://localhost:5175/api/library-rag/status | python -m json.tool
+```
+
+Expected response when connected:
+```json
+{
+  "success": true,
+  "data": {
+    "connected": true,
+    "message": "Library RAG MCP server is connected and ready",
+    "tools": [...],
+    "error": null
+  }
+}
+```
+
+### Available Tools
+
+Once connected, you'll have access to:
+
+1. **upload_document** - Upload and index PDF documents with full pipeline (OCR, metadata, chunking, Weaviate ingestion)
+2. **search_library** - Semantic search over document chunks
+3. **hybrid_search** - Search summaries and high-level content
+4. **list_collections** - List all indexed documents
+5. **get_document** - Retrieve document metadata
+6. **filter_search** - Filter by author, work, or language
+7. **extract_text_from_image** - OCR from image URLs
+
+### Related Configuration
+
+Make sure Weaviate Docker is running:
+
+```bash
+cd C:\GitHub\linear_coding_library_rag\generations\library_rag
+docker-compose up -d
+```
+
+Check Weaviate status:
+
+```bash
+curl http://localhost:8080/v1/meta
+```
+
+## Changelog
+
+**2025-12-26**: Fixed MCP connection issue by adding MISTRAL_API_KEY requirement to documentation. The key must be present in `.env` for the MCP server to start successfully.