diff --git a/.github/workflows/ci-cd.yml b/.github/workflows/ci-cd.yml
index 8e47003..4b00693 100644
--- a/.github/workflows/ci-cd.yml
+++ b/.github/workflows/ci-cd.yml
@@ -31,7 +31,12 @@ jobs:
             name: Windows
 
     steps:
-      - uses: actions/checkout@v4
+      - uses: actions/checkout@v5
+        with:
+          # setuptools-scm uses tags to get the current version, fetch history and tags
+          # to get correct version
+          fetch-depth: 0
+          fetch-tags: 'true'
 
       - name: Set up Python ${{ env.DEV_WORKSPACE_PYTHON_VERSION }}
         uses: actions/setup-python@v5
@@ -43,7 +48,12 @@ jobs:
           python -m venv .venvs/dev_workspace
           source .venvs/dev_workspace/bin/activate
           python -m pip install --upgrade pip==25.1.1
-          python -m pip install --group="dev_workspace"
+
+          # split installation into 2 steps: first internal preset because it is not
+          # published as pypi package, so pip will fail to resolve it in dev_workspace
+          # group and only then other dependencies
+          python -m pip install -e ./finecode_dev_common_preset
+          python -m pip install --group="dev_workspace" -e . -e ./finecode_extension_runner
 
           python -m finecode prepare-envs
         shell: bash
diff --git a/README.md b/README.md
index 8e3a471..71767ae 100644
--- a/README.md
+++ b/README.md
@@ -18,7 +18,7 @@ With FineCode you can:
 
   ```toml
   [dependency-groups]
-  dev_workspace = ["finecode==0.2.*"]
+  dev_workspace = ["finecode==0.3.*"]
   ```
 
 1.1.2 Create dev_workspace venv: `python -m venv .venvs/dev_workspace` ([Python Docs](https://docs.python.org/3/library/venv.html#creating-virtual-environments ))
@@ -33,12 +33,11 @@ NOTE: `pip install` supports `--group` parameter since pip 25.1. Make sure you h
 
 1.2 Using existing preset
 
-1.2.1 Add `dev_no_runtime` dependency group and put `fine_python_recommended` dependency in it:
+1.2.1 Put `fine_python_recommended` dependency in `dev_workspace` dependency group:
 
   ```toml
   [dependency-groups]
-  dev_workspace = ["finecode==0.2.*"]
-  dev_no_runtime = ["fine_python_recommended==0.1.*"]
+  dev_workspace = ["finecode==0.3.*", "fine_python_recommended==0.2.*"]
   ```
 
 For list of presets from FineCode authors see 'Presets' section below.
diff --git a/extensions/fine_python_ast/pyproject.toml b/extensions/fine_python_ast/pyproject.toml
index 1e76cf6..ead7e05 100644
--- a/extensions/fine_python_ast/pyproject.toml
+++ b/extensions/fine_python_ast/pyproject.toml
@@ -1,5 +1,5 @@
 [project]
-name = "fine-python-ast"
+name = "fine_python_ast"
 version = "0.2.0"
 description = ""
 authors = [{ name = "Vladyslav Hnatiuk", email = "aders1234@gmail.com" }]
diff --git a/extensions/fine_python_flake8/pyproject.toml b/extensions/fine_python_flake8/pyproject.toml
index 4abbac0..50e52c7 100644
--- a/extensions/fine_python_flake8/pyproject.toml
+++ b/extensions/fine_python_flake8/pyproject.toml
@@ -1,5 +1,5 @@
 [project]
-name = "fine-python-flake8"
+name = "fine_python_flake8"
 version = "0.2.0"
 description = ""
 authors = [{ name = "Vladyslav Hnatiuk", email = "aders1234@gmail.com" }]
diff --git a/extensions/fine_python_isort/pyproject.toml b/extensions/fine_python_isort/pyproject.toml
index b6ef046..d0c8722 100644
--- a/extensions/fine_python_isort/pyproject.toml
+++ b/extensions/fine_python_isort/pyproject.toml
@@ -1,5 +1,5 @@
 [project]
-name = "fine-python-isort"
+name = "fine_python_isort"
 version = "0.2.0"
 description = ""
 authors = [{ name = "Vladyslav Hnatiuk", email = "aders1234@gmail.com" }]
diff --git a/extensions/fine_python_module_exports/pyproject.toml b/extensions/fine_python_module_exports/pyproject.toml
index 0d163c5..85b4348 100644
--- a/extensions/fine_python_module_exports/pyproject.toml
+++ b/extensions/fine_python_module_exports/pyproject.toml
@@ -1,5 +1,5 @@
 [project]
-name = "fine-python-module-exports"
+name = "fine_python_module_exports"
 version = "0.2.0"
 description = ""
 authors = [{ name = "Vladyslav Hnatiuk", email = "aders1234@gmail.com" }]
diff --git a/extensions/fine_python_mypy/pyproject.toml b/extensions/fine_python_mypy/pyproject.toml
index 346bb29..19762d0 100644
--- a/extensions/fine_python_mypy/pyproject.toml
+++ b/extensions/fine_python_mypy/pyproject.toml
@@ -1,5 +1,5 @@
 [project]
-name = "fine-python-mypy"
+name = "fine_python_mypy"
 version = "0.2.0"
 description = ""
 authors = [{ name = "Vladyslav Hnatiuk", email = "aders1234@gmail.com" }]
diff --git a/extensions/fine_python_pip/pyproject.toml b/extensions/fine_python_pip/pyproject.toml
index 6751b15..ed49dd9 100644
--- a/extensions/fine_python_pip/pyproject.toml
+++ b/extensions/fine_python_pip/pyproject.toml
@@ -1,5 +1,5 @@
 [project]
-name = "fine-python-pip"
+name = "fine_python_pip"
 version = "0.1.0"
 description = ""
 authors = [{ name = "Vladyslav Hnatiuk", email = "aders1234@gmail.com" }]
@@ -8,11 +8,12 @@ requires-python = ">=3.11, < 3.14"
 dependencies = ["finecode_extension_api==0.3.*"]
 
 [dependency-groups]
-dev_workspace = ["finecode==0.3.0"]
-dev_no_runtime = ["finecode_dev_common_preset==0.2.*"]
+dev_workspace = ["finecode==0.3.*", "finecode_dev_common_preset==0.2.*"]
 
 [tool.finecode]
 presets = [{ source = "finecode_dev_common_preset" }]
 
-[tool.finecode.env.dev_no_runtime.dependencies]
+[tool.finecode.env.dev_workspace.dependencies]
 finecode_dev_common_preset = { path = "../../finecode_dev_common_preset", editable = true }
+finecode = { path = "../../", editable = true }
+finecode_extension_runner = { path = "../../finecode_extension_runner", editable = true }
diff --git a/extensions/fine_python_virtualenv/pyproject.toml b/extensions/fine_python_virtualenv/pyproject.toml
index a0de105..c8c3ab1 100644
--- a/extensions/fine_python_virtualenv/pyproject.toml
+++ b/extensions/fine_python_virtualenv/pyproject.toml
@@ -1,5 +1,5 @@
 [project]
-name = "fine-python-virtualenv"
+name = "fine_python_virtualenv"
 version = "0.1.0"
 description = ""
 authors = [{ name = "Vladyslav Hnatiuk", email = "aders1234@gmail.com" }]
@@ -11,11 +11,12 @@ dependencies = [
 ]
 
 [dependency-groups]
-dev_workspace = ["finecode==0.3.0"]
-dev_no_runtime = ["finecode_dev_common_preset==0.2.*"]
+dev_workspace = ["finecode==0.3.*", "finecode_dev_common_preset==0.2.*"]
 
 [tool.finecode]
 presets = [{ source = "finecode_dev_common_preset" }]
 
-[tool.finecode.env.dev_no_runtime.dependencies]
+[tool.finecode.env.dev_workspace.dependencies]
 finecode_dev_common_preset = { path = "../../finecode_dev_common_preset", editable = true }
+finecode = { path = "../../", editable = true }
+finecode_extension_runner = { path = "../../finecode_extension_runner", editable = true }
diff --git a/finecode_dev_common_preset/pyproject.toml b/finecode_dev_common_preset/pyproject.toml
index 7424a97..74bdb9f 100644
--- a/finecode_dev_common_preset/pyproject.toml
+++ b/finecode_dev_common_preset/pyproject.toml
@@ -1,5 +1,5 @@
 [project]
-name = "finecode-dev-common-preset"
+name = "finecode_dev_common_preset"
 version = "0.2.0"
 description = ""
 authors = [{ name = "Vladyslav Hnatiuk", email = "aders1234@gmail.com" }]
diff --git a/finecode_dev_common_preset/src/finecode_dev_common_preset/preset.toml b/finecode_dev_common_preset/src/finecode_dev_common_preset/preset.toml
index 3790b5f..189e726 100644
--- a/finecode_dev_common_preset/src/finecode_dev_common_preset/preset.toml
+++ b/finecode_dev_common_preset/src/finecode_dev_common_preset/preset.toml
@@ -8,6 +8,18 @@ presets = [
 source = "fine_python_black.BlackFormatHandler"
 config.preview = true
 
+# in development finecode can only be started with local version of finecode_extension_runner,
+# otherwise version conflict occurs, because versions of finecode and
+# finecode_extension_runner must match
+[tool.finecode.env.runtime.dependencies]
+finecode_extension_runner = { path = "../../../finecode_extension_runner", editable = true }
+
+[tool.finecode.env.dev.dependencies]
+finecode_extension_runner = { path = "../../../finecode_extension_runner", editable = true }
+
+[tool.finecode.env.dev_no_runtime.dependencies]
+finecode_extension_runner = { path = "../../../finecode_extension_runner", editable = true }
+
 # currently, all packages in finecode repository are pure python packages, reuse
 # setuptools build in all of them
 [build-system]
diff --git a/finecode_extension_api/pyproject.toml b/finecode_extension_api/pyproject.toml
index 900c6fc..79aa60f 100644
--- a/finecode_extension_api/pyproject.toml
+++ b/finecode_extension_api/pyproject.toml
@@ -1,5 +1,5 @@
 [project]
-name = "finecode-extension-api"
+name = "finecode_extension_api"
 version = "0.3.0"
 description = ""
 authors = [{ name = "Vladyslav Hnatiuk", email = "aders1234@gmail.com" }]
@@ -8,11 +8,12 @@ requires-python = ">=3.11, < 3.14"
 dependencies = ["typing-extensions (>=4.12.2,<5.0.0)"]
 
 [dependency-groups]
-dev_workspace = ["finecode==0.3.0"]
-dev_no_runtime = ["finecode_dev_common_preset==0.2.*"]
+dev_workspace = ["finecode==0.3.*", "finecode_dev_common_preset==0.2.*"]
 
 [tool.finecode]
 presets = [{ source = "finecode_dev_common_preset" }]
 
-[tool.finecode.env.dev_no_runtime.dependencies]
+[tool.finecode.env.dev_workspace.dependencies]
 finecode_dev_common_preset = { path = "../finecode_dev_common_preset", editable = true }
+finecode = { path = "../", editable = true }
+finecode_extension_runner = { path = "../finecode_extension_runner", editable = true }
diff --git a/finecode_extension_runner/pyproject.toml b/finecode_extension_runner/pyproject.toml
index 2676c37..7edcaec 100644
--- a/finecode_extension_runner/pyproject.toml
+++ b/finecode_extension_runner/pyproject.toml
@@ -9,7 +9,7 @@ dependencies = [
     "loguru==0.7.*",
     "tomlkit==0.11.*",
     "click==8.1.*",
-    "pydantic==2.10.*",
+    "pydantic==2.11.*",
     "platformdirs==4.3.*",
     "pygls==2.0.0-a2",
     "finecode_extension_api==0.3.*",
@@ -17,16 +17,19 @@ dependencies = [
 ]
 
 [dependency-groups]
-dev_workspace = ["build==1.2.2.post1", "finecode==0.3.0"]
-dev = [{ include-group = "runtime" }, "pytest==7.4.*", "debugpy==1.8.*"]
-dev_no_runtime = [
+# file_python_import_linter is temporary disabled, because it isn't ported to the new finecode_extension_api yet
+# "fine_python_import_linter @ git+https://github.com/finecode-dev/finecode.git#subdirectory=extensions/fine_python_import_linter"
+dev_workspace = [
+    "build==1.2.2.post1",
+    "finecode==0.3.*",
     "finecode_dev_common_preset==0.2.*",
-    # file_python_import_linter is temporary disabled, because it isn't ported to the new finecode_extension_api yet
-    # "fine_python_import_linter @ git+https://github.com/finecode-dev/finecode.git#subdirectory=extensions/fine_python_import_linter",
 ]
+dev = [{ include-group = "runtime" }, "pytest==7.4.*", "debugpy==1.8.*"]
 
-[tool.finecode.env.dev_no_runtime.dependencies]
+[tool.finecode.env.dev_workspace.dependencies]
 finecode_dev_common_preset = { path = "../finecode_dev_common_preset", editable = true }
+finecode = { path = "../", editable = true }
+finecode_extension_runner = { path = "../finecode_extension_runner", editable = true }
 
 [build-system]
 requires = ["setuptools>=64", "setuptools-scm>=8"]
diff --git a/finecode_extension_runner/src/finecode_extension_runner/action_handlers/dependency_config_utils.py b/finecode_extension_runner/src/finecode_extension_runner/action_handlers/dependency_config_utils.py
index 1a0e93e..f42e874 100644
--- a/finecode_extension_runner/src/finecode_extension_runner/action_handlers/dependency_config_utils.py
+++ b/finecode_extension_runner/src/finecode_extension_runner/action_handlers/dependency_config_utils.py
@@ -41,6 +41,7 @@ def make_env_deps_pip_compatible(
             # check all dependencies because it can be duplicated: e.g. as explicit
             # dependency and as dependency of action handler.
             dep_indexes_in_group: list[int] = []
+            configured_dep_found_in_dep_group = False
             for idx, dep in enumerate(env_deps_group):
                 if isinstance(dep, dict):
                     if "include-group" in dep:
@@ -53,9 +54,7 @@ def make_env_deps_pip_compatible(
                 elif isinstance(dep, str):
                     if get_dependency_name(dep) == dep_name:
                         dep_indexes_in_group.append(idx)
-
-            if len(dep_indexes_in_group) == 0:
-                continue
+                        configured_dep_found_in_dep_group = True
 
             resolved_path_to_dep = pathlib.Path(dep_params["path"])
             if not resolved_path_to_dep.is_absolute():
@@ -67,6 +66,12 @@ def make_env_deps_pip_compatible(
             for idx in dep_indexes_in_group:
                 env_deps_group[idx] = new_dep_str_in_group
 
+            if not configured_dep_found_in_dep_group:
+                # if dependency has configuration, but was not found in dependency
+                # group of environment, still add it, because it can be deeper in the
+                # dependency tree and user wants to overwrite it
+                env_deps_group.append(new_dep_str_in_group)
+
 
 def get_dependency_name(dependency_str: str) -> str:
     # simplified way for now: find the first character which is not allowed in package
diff --git a/finecode_extension_runner/src/finecode_extension_runner/action_handlers/prepare_runners_install_runner_and_presets.py b/finecode_extension_runner/src/finecode_extension_runner/action_handlers/prepare_runners_install_runner_and_presets.py
index f16dbfe..89330a5 100644
--- a/finecode_extension_runner/src/finecode_extension_runner/action_handlers/prepare_runners_install_runner_and_presets.py
+++ b/finecode_extension_runner/src/finecode_extension_runner/action_handlers/prepare_runners_install_runner_and_presets.py
@@ -54,7 +54,7 @@ async def run(
                 )
             except FailedToGetDependencies as exception:
                 raise code_action.ActionFailedException(
-                    f"Failed to get dependencies of env {env.name} in {project_def_path} (install_runner_and_presets handler)"
+                    f"Failed to get dependencies of env {env.name} in {project_def_path}: {exception.message} (install_runner_and_presets handler)"
                 )
             dependencies_by_env[env.name] = dependencies
 
@@ -161,10 +161,10 @@ def get_dependencies_in_project_raw_config(
                 and dependency_config_utils.get_dependency_name(dep) == preset_package
             )
         except StopIteration:
-            if env_name == "dev_no_runtime":
-                # all preset packages must be in 'dev_no_runtime' env
+            if env_name == "dev_workspace":
+                # all preset packages must be in 'dev_workspace' env
                 raise FailedToGetDependencies(
-                    f"'{preset_package}' is used as preset source, but not declared in 'dev_no_runtime' dependency group"
+                    f"'{preset_package}' is used as preset source, but not declared in 'dev_workspace' dependency group"
                 )
             else:
                 continue
diff --git a/presets/fine_python_format/pyproject.toml b/presets/fine_python_format/pyproject.toml
index 5d99042..631796d 100644
--- a/presets/fine_python_format/pyproject.toml
+++ b/presets/fine_python_format/pyproject.toml
@@ -1,5 +1,5 @@
 [project]
-name = "fine-python-format"
+name = "fine_python_format"
 version = "0.2.0"
 description = ""
 authors = [{ name = "Vladyslav Hnatiuk", email = "aders1234@gmail.com" }]
diff --git a/presets/fine_python_lint/pyproject.toml b/presets/fine_python_lint/pyproject.toml
index ead7668..fbdf476 100644
--- a/presets/fine_python_lint/pyproject.toml
+++ b/presets/fine_python_lint/pyproject.toml
@@ -1,5 +1,5 @@
 [project]
-name = "fine-python-lint"
+name = "fine_python_lint"
 version = "0.2.0"
 description = ""
 authors = [{ name = "Vladyslav Hnatiuk", email = "aders1234@gmail.com" }]
diff --git a/presets/fine_python_recommended/pyproject.toml b/presets/fine_python_recommended/pyproject.toml
index 30cd230..e653876 100644
--- a/presets/fine_python_recommended/pyproject.toml
+++ b/presets/fine_python_recommended/pyproject.toml
@@ -1,5 +1,5 @@
 [project]
-name = "fine-python-recommended"
+name = "fine_python_recommended"
 version = "0.2.0"
 description = ""
 authors = [{ name = "Vladyslav Hnatiuk", email = "aders1234@gmail.com" }]
diff --git a/pyproject.toml b/pyproject.toml
index 2230c04..724113d 100644
--- a/pyproject.toml
+++ b/pyproject.toml
@@ -10,25 +10,27 @@ dependencies = [
     "tomlkit==0.11.*",
     "watchdog==4.0.*",
     "click==8.1.*",
-    "pydantic==2.10.*",
+    "pydantic==2.11.*",
     "platformdirs==4.3.*",
     "pygls==2.0.0-a2",
     "finecode_extension_api==0.3.*",
     "finecode_extension_runner==0.3.*",
     "ordered-set==4.1.*",
-    "mcp==1.9.*",
+    "mcp==1.13.*",
     "fine_python_virtualenv==0.1.*",
     "fine_python_pip==0.1.*",
 ]
 
 [dependency-groups]
-dev_workspace = ["build==1.2.2.post1", "finecode==0.3.0", "debugpy==1.8.*"]
-dev = [{ include-group = "runtime" }, "pytest==7.4.*", "debugpy==1.8.*"]
-dev_no_runtime = [
+# file_python_import_linter is temporary disabled, because it isn't ported to the new finecode_extension_api yet
+# "fine_python_import_linter @ git+https://github.com/finecode-dev/finecode.git#subdirectory=extensions/fine_python_import_linter",
+dev_workspace = [
+    "build==1.2.2.post1",
+    "finecode==0.3.*",
     "finecode_dev_common_preset==0.2.*",
-    # file_python_import_linter is temporary disabled, because it isn't ported to the new finecode_extension_api yet
-    # "fine_python_import_linter @ git+https://github.com/finecode-dev/finecode.git#subdirectory=extensions/fine_python_import_linter",
+    "debugpy==1.8.*",
 ]
+dev = [{ include-group = "runtime" }, "pytest==7.4.*", "debugpy==1.8.*"]
 
 [build-system]
 requires = ["setuptools>=64", "setuptools-scm>=8"]
@@ -39,8 +41,9 @@ build-backend = "setuptools.build_meta"
 [tool.finecode]
 presets = [{ source = "finecode_dev_common_preset" }]
 
-[tool.finecode.env.dev_no_runtime.dependencies]
+[tool.finecode.env.dev_workspace.dependencies]
 finecode_dev_common_preset = { path = "./finecode_dev_common_preset", editable = true }
+finecode_extension_runner = { path = "./finecode_extension_runner", editable = true }
 
 [tool.importlinter]
 root_package = "finecode"
diff --git a/src/finecode/cli.py b/src/finecode/cli.py
index 3d23742..6175b48 100644
--- a/src/finecode/cli.py
+++ b/src/finecode/cli.py
@@ -2,8 +2,8 @@
 import json
 import os
 import pathlib
-import typing
 import sys
+import typing
 
 import click
 from loguru import logger
@@ -89,7 +89,7 @@ async def show_user_message(message: str, message_type: str) -> None:
 def deserialize_action_payload(raw_payload: dict[str, str]) -> dict[str, typing.Any]:
     deserialized_payload = {}
     for key, value in raw_payload.items():
-        if value.startswith('{') and value.endswith('}'):
+        if value.startswith("{") and value.endswith("}"):
             try:
                 deserialized_value = json.loads(value)
             except json.JSONDecodeError:
@@ -168,17 +168,21 @@ def run(ctx) -> None:
                 sys.exit(1)
             else:
                 arg_name, arg_value = arg[2:].split("=")
-                arg_name = arg_name.replace('-', '_')
+                arg_name = arg_name.replace("-", "_")
                 action_payload[arg_name] = arg_value.strip('"').strip("'")
         processed_args_count += 1
 
     user_messages._notification_sender = show_user_message
 
-    deserialized_payload= deserialize_action_payload(action_payload)
+    deserialized_payload = deserialize_action_payload(action_payload)
     try:
         output, return_code = asyncio.run(
             run_cmd.run_actions(
-                workdir_path, projects, actions_to_run, deserialized_payload, concurrently
+                workdir_path,
+                projects,
+                actions_to_run,
+                deserialized_payload,
+                concurrently,
             )
         )
         click.echo(output)
diff --git a/src/finecode/cli_app/prepare_envs.py b/src/finecode/cli_app/prepare_envs.py
index cf62d7c..4b1eb7d 100644
--- a/src/finecode/cli_app/prepare_envs.py
+++ b/src/finecode/cli_app/prepare_envs.py
@@ -14,7 +14,7 @@ class PrepareEnvsFailed(Exception): ...
 
 async def prepare_envs(workdir_path: pathlib.Path, recreate: bool) -> None:
     # similar to `run_actions`, but with certain differences:
-    # - prepare_envs doesn't support presets because `dev_no_runtime` env most
+    # - prepare_envs doesn't support presets because `dev_workspace` env most
     #   probably doesn't exist yet
     # - we don't need to check missing actions, because prepare_envs is a builtin action
     #   and it exists always
@@ -73,11 +73,32 @@ async def prepare_envs(workdir_path: pathlib.Path, recreate: bool) -> None:
             ws_context=ws_context,
         )
 
-        # now all 'dev_workspace' envs are valid, run 'prepare_runners' in them to create
-        # venvs and install runners and presets in them. This is required to be able to
-        # resolve presets which can contain additional dependency configurations.
-        # Only then run `prepare_envs` to install dependencies in each subproject.
+        # reread projects configs, now with resolved presets
+        # to be able to resolve presets, start runners with presets first
+        try:
+            await runner_manager.start_runners_with_presets(
+                projects=projects, ws_context=ws_context
+            )
+        except runner_manager.RunnerFailedToStart as exception:
+            raise PrepareEnvsFailed(
+                f"Starting runners with presets failed: {exception.message}"
+            )
+
+        for project in projects:
+            try:
+                await read_configs.read_project_config(
+                    project=project, ws_context=ws_context
+                )
+                collect_actions.collect_actions(
+                    project_path=project.dir_path, ws_context=ws_context
+                )
+            except config_models.ConfigurationError as exception:
+                raise PrepareEnvsFailed(
+                    f"Rereading project config with presets and collecting actions in {project.dir_path} failed: {exception.message}"
+                )
 
+        # now all 'dev_workspace' envs are valid, run 'prepare_runners' in them to create
+        # venvs and install runners and presets in them
         actions_by_projects: dict[pathlib.Path, list[str]] = {
             project.dir_path: ["prepare_runners"] for project in projects
         }
@@ -107,30 +128,6 @@ async def prepare_envs(workdir_path: pathlib.Path, recreate: bool) -> None:
         if result_return_code != 0:
             raise PrepareEnvsFailed(result_output)
 
-        # reread projects configs, now with resolved presets
-        # to be able to resolve presets, start dev_no_runtime runners first
-        try:
-            await runner_manager.start_runners_with_presets(
-                projects=projects, ws_context=ws_context
-            )
-        except runner_manager.RunnerFailedToStart as exception:
-            raise PrepareEnvsFailed(
-                f"Starting runners with presets failed: {exception.message}"
-            )
-
-        for project in projects:
-            try:
-                await read_configs.read_project_config(
-                    project=project, ws_context=ws_context
-                )
-                collect_actions.collect_actions(
-                    project_path=project.dir_path, ws_context=ws_context
-                )
-            except config_models.ConfigurationError as exception:
-                raise PrepareEnvsFailed(
-                    f"Rereading project config with presets and collecting actions in {project.dir_path} failed: {exception.message}"
-                )
-
         actions_by_projects: dict[pathlib.Path, list[str]] = {
             project.dir_path: ["prepare_envs"] for project in projects
         }
diff --git a/src/finecode/config/read_configs.py b/src/finecode/config/read_configs.py
index e5f9302..81455c8 100644
--- a/src/finecode/config/read_configs.py
+++ b/src/finecode/config/read_configs.py
@@ -132,14 +132,14 @@ async def read_project_config(
             except config_models.ValidationError as exception:
                 raise config_models.ConfigurationError(str(exception))
 
-            # all presets expected to be in `dev_no_runtime` environment
+            # all presets expected to be in `dev_workspace` environment
             project_runners = ws_context.ws_projects_extension_runners[project.dir_path]
             # TODO: can it be the case that there is no such runner?
-            dev_no_runtime_runner = project_runners["dev_no_runtime"]
+            dev_workspace_runner = project_runners["dev_workspace"]
             new_config = await collect_config_from_py_presets(
                 presets_sources=[preset.source for preset in presets],
                 def_path=project.def_path,
-                runner=dev_no_runtime_runner,
+                runner=dev_workspace_runner,
             )
             if new_config is not None:
                 _merge_projects_configs(
@@ -269,9 +269,12 @@ async def collect_config_from_py_presets(
         preset_toml_path = preset_project_path / "preset.toml"
         preset_toml, preset_config = read_preset_config(preset_toml_path, preset.source)
         if config is None:
-            config = preset_toml
+            # use merge instead of just assigning config, because merge not only merges
+            # configs, but also adapts relative pathes etc.
+            config = {}
+            _merge_projects_configs(config, def_path, preset_toml, preset_toml_path)
         else:
-            _merge_projects_configs(config, def_path, preset_toml, preset_project_path)
+            _merge_projects_configs(config, def_path, preset_toml, preset_toml_path)
         new_presets_sources = (
             set([extend.source for extend in preset_config.extends]) - processed_presets
         )
@@ -430,22 +433,14 @@ def _merge_projects_configs(
                                     env_config1_deps[dependency_name] = dependency
                                 else:
                                     if "path" in dependency:
-                                        new_path = dependency["path"]
-                                        if new_path.startswith("."):
-                                            abs_path = (
-                                                config2_filepath.parent / new_path
-                                            )
-                                            new_rel_path = abs_path.relative_to(
-                                                config1_filepath.parent
-                                            )
-                                            new_path = new_rel_path.as_posix()
-                                        env_config1_deps[dependency_name][
-                                            "path"
-                                        ] = new_path
+                                        env_config1_deps[dependency_name]["path"] = (
+                                            dependency["path"]
+                                        )
                                     if "editable" in dependency:
                                         env_config1_deps[dependency_name][
                                             "editable"
                                         ] = dependency["editable"]
+
                     if "runner" in env_config2:
                         if "runner" not in env_config1:
                             env_config1["runner"] = {}
@@ -454,6 +449,29 @@ def _merge_projects_configs(
 
                         if "debug" in env_config2_runner:
                             env_config1_runner["debug"] = env_config2_runner["debug"]
+
+                for updated_dep_name, updated_dep_config in env_config2.get(
+                    "dependencies", {}
+                ).items():
+                    if "path" in updated_dep_config:
+                        # if path is provided in the config2 dependency,
+                        # it overwrites path in config1 and relative path
+                        # must be adjusted
+                        new_path = updated_dep_config["path"]
+                        if new_path.startswith("."):
+                            abs_path = (config2_filepath.parent / new_path).resolve()
+                            new_rel_path = abs_path.relative_to(
+                                config1_filepath.parent, walk_up=True
+                            )
+                            new_path = new_rel_path.as_posix()
+                            # .relative_to() doesn't add './' for items in the current
+                            # directory, but FineCode needs it to distinguish relative
+                            # path from absolute one
+                            if not new_path.startswith("."):
+                                new_path = "./" + new_path
+                            all_envs_config1[env_name]["dependencies"][
+                                updated_dep_name
+                            ]["path"] = new_path
         elif key in config1:
             tool_finecode_config1[key].update(value)
         else:
diff --git a/src/finecode/lsp_server/endpoints/action_tree.py b/src/finecode/lsp_server/endpoints/action_tree.py
index ec0de72..b04fcc5 100644
--- a/src/finecode/lsp_server/endpoints/action_tree.py
+++ b/src/finecode/lsp_server/endpoints/action_tree.py
@@ -178,9 +178,9 @@ async def __list_actions(
     # wait for start of all runners, this is required to be able to resolve presets
     all_started_coros = []
     for envs in ws_context.ws_projects_extension_runners.values():
-        # all presets are expected to be in `dev_no_runtime` env
-        dev_no_runtime_runner = envs["dev_no_runtime"]
-        all_started_coros.append(dev_no_runtime_runner.initialized_event.wait())
+        # all presets are expected to be in `dev_workspace` env
+        dev_workspace_runner = envs["dev_workspace"]
+        all_started_coros.append(dev_workspace_runner.initialized_event.wait())
     await asyncio.gather(*all_started_coros)
 
     nodes: list[schemas.ActionTreeNode] = create_node_list_for_ws(ws_context)
diff --git a/src/finecode/runner/manager.py b/src/finecode/runner/manager.py
index a6c5903..97ecfd5 100644
--- a/src/finecode/runner/manager.py
+++ b/src/finecode/runner/manager.py
@@ -242,13 +242,13 @@ async def update_runners(ws_context: context.WorkspaceContext) -> None:
                 project_status = project.status
                 if (
                     ws_context.ws_projects_extension_runners.get(new_dir, {}).get(
-                        "dev_no_runtime", None
+                        "dev_workspace", None
                     )
                     is not None
                 ):
-                    # start only if dev_no_runtime started successfully
+                    # start only if dev_workspace started successfully
                     for env in project.envs:
-                        if env == "dev_no_runtime":
+                        if env == "dev_workspace":
                             # this env has already started above
                             continue
 
@@ -300,14 +300,14 @@ async def start_runners_with_presets(
 ) -> None:
     new_runners_tasks: list[asyncio.Task] = []
     try:
-        # first start runner in 'dev_no_runtime' env to be able to resolve presets for
-        # other envs (presets can be currently only in `dev_no_runtime` env)
+        # first start runner in 'dev_workspace' env to be able to resolve presets for
+        # other envs (presets can be currently only in `dev_workspace` env)
         async with asyncio.TaskGroup() as tg:
             for project in projects:
                 project_status = project.status
                 if project_status == domain.ProjectStatus.CONFIG_VALID:
                     task = tg.create_task(
-                        _start_dev_no_runtime_runner(
+                        _start_dev_workspace_runner(
                             project_def=project, ws_context=ws_context
                         )
                     )
@@ -375,11 +375,11 @@ async def start_runner(
     return runner
 
 
-async def _start_dev_no_runtime_runner(
+async def _start_dev_workspace_runner(
     project_def: domain.Project, ws_context: context.WorkspaceContext
 ) -> runner_info.ExtensionRunnerInfo:
     return await start_runner(
-        project_def=project_def, env_name="dev_no_runtime", ws_context=ws_context
+        project_def=project_def, env_name="dev_workspace", ws_context=ws_context
     )