I believe that the file indexing exclusion is based on .gitignore, not files.watcherExclude, but let me check on that and confirm.

I tried with a small project, it worked fine, no high CPU usage.

However with a large project, it seems that it indexed, then dropped CPU, then I started opening up files and working with them, then the CPU spiked again.

I'll look into this. Kiro is supposed to be doing progressive reindexing. When you make a change it should only have to reindex the files that changed. If you have any logs or other data you are willing to share, to help the team investigate you can use the "report a bug / suggest an idea" link at the bottom, or open an issue at: https://github.com/kirodotdev/Kiro/issues