diff --git a/apps/vscode/CHANGELOG.md b/apps/vscode/CHANGELOG.md
index fda7a419..1e824179 100644
--- a/apps/vscode/CHANGELOG.md
+++ b/apps/vscode/CHANGELOG.md
@@ -4,6 +4,7 @@
 
 - Use `QUARTO_VISUAL_EDITOR_CONFIRMED` > `PW_TEST` > `CI` to bypass (`true`) or force (`false`) the Visual Editor confirmation dialogue (<https://github.com/quarto-dev/quarto/pull/654>).
 - Fix behavior in Positron when running a cell containing invalid/incomplete code (<https://github.com/quarto-dev/quarto/pull/664>).
+- Ensure `#|` is added only at the beginning of a new line (<https://github.com/quarto-dev/quarto/pull/649>).
 - Fix `language` typos throughout the codebase (<https://github.com/quarto-dev/quarto/pull/650>)
 
 ## 1.118.0 (Release on 2024-11-26)
diff --git a/apps/vscode/package.json b/apps/vscode/package.json
index 5aa0cd1f..462a9b50 100644
--- a/apps/vscode/package.json
+++ b/apps/vscode/package.json
@@ -937,22 +937,32 @@
           "default": true,
           "markdownDescription": "Show parameter help when editing function calls."
         },
-        "quarto.cells.background.enabled": {
+        "quarto.cells.background": {
           "order": 19,
           "scope": "window",
-          "type": "boolean",
-          "default": true,
-          "markdownDescription": "Enable coloring the background of executable code cells."
+          "type": "string",
+          "default": "default",
+          "enum": [
+            "default",
+            "useTheme",
+            "off"
+          ],
+          "markdownDescription": "Controls the background coloring of executable code cells.",
+          "enumDescriptions": [
+            "Use the default light and dark background colors. Can specify colors in `quarto.cells.background.lightDefault` and `quarto.cells.background.darkDefault`",
+            "Use the `notebook.selectedCellBackground` color from the VS Code theme.",
+            "Disable background coloring of executable code cells."
+          ]
         },
-        "quarto.cells.background.light": {
+        "quarto.cells.background.lightDefault": {
           "order": 20,
           "scope": "window",
           "type": "string",
           "format": "color",
           "default": "#E1E1E166",
-          "markdownDescription": "CSS color for background of executable code cells on light themes.\n\n*Note that this color should include an alpha channel so that selections show up against the background.*"
+          "markdownDescription": "CSS color for background of executable code cells on light themes. Only used when `quarto.cells.background: \"default\"`.\n\n*Note that this color should include an alpha channel so that selections show up against the background.*"
         },
-        "quarto.cells.background.dark": {
+        "quarto.cells.background.darkDefault": {
           "order": 21,
           "scope": "window",
           "type": "string",
@@ -960,8 +970,8 @@
           "default": "#40404066",
           "markdownDescription": "CSS color for background of executable code cells on dark themes.\n\n*Note that this color should include an alpha channel so that selections show up against the background.*"
         },
-        "quarto.cells.background.delay": {
-          "order": 22,
+				"quarto.cells.background.delay": {
+					"order": 23,
           "scope": "window",
           "type": "integer",
           "default": 250,
diff --git a/apps/vscode/src/providers/background.ts b/apps/vscode/src/providers/background.ts
index 2aae39d7..c234636b 100644
--- a/apps/vscode/src/providers/background.ts
+++ b/apps/vscode/src/providers/background.ts
@@ -192,6 +192,12 @@ function clearEditorHighlightDecorations(editor: vscode.TextEditor) {
   editor.setDecorations(highlightingConfig.backgroundDecoration(), []);
 }
 
+enum CellBackground {
+  default = "default",
+  off = "off",
+  useTheme = "useTheme",
+}
+
 class HiglightingConfig {
   constructor() { }
 
@@ -213,10 +219,18 @@ class HiglightingConfig {
 
   public sync() {
     const config = vscode.workspace.getConfiguration("quarto");
-    const light = config.get("cells.background.light", "#E1E1E166");
-    const dark = config.get("cells.background.dark", "#40404066");
+    const backgroundOption = config.get<CellBackground>("cells.background", CellBackground.default);
+    let light, dark;
+    if (backgroundOption === CellBackground.useTheme) {
+      const activeCellBackgroundThemeColor = new vscode.ThemeColor('notebook.selectedCellBackground');
+      light = activeCellBackgroundThemeColor;
+      dark = activeCellBackgroundThemeColor;
+    } else {
+      light = config.get<string>("cells.background.lightDefault", "#E1E1E166");
+      dark = config.get<string>("cells.background.darkDefault", "#40404066");
+    }
 
-    this.enabled_ = config.get("cells.background.enabled", true);
+    this.enabled_ = backgroundOption !== CellBackground.off;
     this.delayMs_ = config.get("cells.background.delay", 250);
 
 
diff --git a/apps/vscode/src/providers/option.ts b/apps/vscode/src/providers/option.ts
index 32335087..eff92603 100644
--- a/apps/vscode/src/providers/option.ts
+++ b/apps/vscode/src/providers/option.ts
@@ -84,7 +84,7 @@ function handleOptionEnter(editor: TextEditor, comment: string) {
     });
   } else if (currentLine.startsWith(optionComment)) {
     editor.edit((builder) => {
-      builder.insert(editor.selection.start.translate(1, 0), optionComment);
+      builder.insert(editor.selection.start.translate(1, -editor.selection.active.character), optionComment);
     });
   }
 }