update instructions on how to run locally

guides/studio-development.md

@@ -1,22 +1,33 @@
 # Studio Development
 
-In production, the code used to facilitate Studio functionality will be retrieved from the Cloud. While Studio is still in its early stages it is hidden behind an environment variable: `CYPRESS_ENABLE_CLOUD_STUDIO`. Set this environment variable to `true` if you want to run Cypress against the deployed version of studio code:
+In production, the code used to facilitate Studio functionality will be retrieved from the Cloud. While Studio is still in its early stages it is hidden behind an environment variable: `CYPRESS_ENABLE_CLOUD_STUDIO` but can also be run against local cloud Studio code via the environment variable: `CYPRESS_LOCAL_STUDIO_PATH`.
 
-```sh
-CYPRESS_ENABLE_CLOUD_STUDIO=true yarn cypress:open
-```
-
-If you want to run against locally developed Studio code:
+To run against locally developed Studio:
 
 - Clone the `cypress-services` repo (this requires that you be a member of the Cypress organization)
   - Run `yarn`
-  - Run `yarn watch` in `app/studio`
-- Set `CYPRESS_LOCAL_STUDIO_PATH` to the path to the `cypress-services/app/studio/dist/development` directory
+  - Run `yarn watch` in `app/packages/studio`
+- Set:
+  - `CYPRESS_INTERNAL_ENV=<environment>` (e.g. `staging` or `production` if you want to hit those deployments of `cypress-services` or `development` if you want to hit a locally running version of `cypress-services`)
+  - `CYPRESS_LOCAL_STUDIO_PATH` to the path to the `cypress-services/app/packages/studio/dist/development` directory
+
+To run against a deployed version of studio:
+
+- Set:
+  - `CYPRESS_INTERNAL_ENV=<environment>` (e.g. `staging` or `production` if you want to hit those deployments of `cypress-services` or `development` if you want to hit a locally running version of `cypress-services`)
+  - `CYPRESS_ENABLE_CLOUD_STUDIO=true`
+
+Regardless of running against local or deployed studio:
+
 - Clone the `cypress` repo
   - Run `yarn`
   - Run `yarn cypress:open`
-
-Note: When using the `CYPRESS_LOCAL_STUDIO_PATH` environment variable, we bypass our error reporting and instead throw the exception immediately. The purpose of this is to try and surface issues immediately during local development.
+  - Log In to the Cloud via the App
+  - Ensure the project has been setup in the `Cypress (staging)` if in staging environment or `Cypress Internal Org` if in production environment and has a `projectId` that represents that. If developing against locally running `cypress-services`, ensure that the project has the feature `studio-ai` enabled for it.
+  - Open a project that has `experimentalStudio: true` set in the `e2e` config of the `cypress.config.js|ts` file.
+  - Click to 'Add Commands to Test' after hovering over a test command.
+
+Note: When using the `CYPRESS_LOCAL_STUDIO_PATH` environment variable or when running the Cypress app via the locally cloned repository, we bypass our error reporting and instead log errors to the browser or node console.
 
 ## Types