Is Arduino IDE v1 using esptool.py for Uploading esp32 firmware?

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You didn't follow my instructions correctly:

This is what I meant when I said " I think this will make things clear". The ESP32 boards platform uses an EXE package of esptool for Windows users. The esptool.py file is the source of that .exe file, but editing the .py file won't have any effect on the behavior of the upload unless you rebuild the .exe file from that source file.