Generally curious, how is this different from pointing Claude Cowork at an Obsidian Vault?

Biggest difference is Atomic leverages an LLM to auto-tag and a text embedding pipeline to drive semantic search - so the knowledge base is self-organizing. The bet here is that having an agent grep the filesystem is fine for a carefully curated, relatively small set of markdown files. It starts to degrade if you approach your knowledge base as a place to put everything: personal notes, articles you find interesting, entire textbooks if you want to. Having a vector database in this context is pretty much required past a certain scale; a filesystem-based approach is just an incredibly inefficient way to do retrieval in this context, and your agent is bound to miss important data points.

Does the LLM auto-tagging and embedding pipeline run on the device, or are they remote calls?

So an Obsidian plugin? Got it.

One can imagine an obsidian plugin of any arbitrary level of complexity, given it's written in a Turing-complete language.