fix: Improve MCP server configuration and initialization

- Fix API key detection: Remove hardcoded OpenAI checks, let factories handle provider-specific validation
- Fix .env file loading: Search for .env in mcp_server directory first
- Change default transport to SSE for broader compatibility (was stdio)
- Add proper error handling with warnings for failed client initialization
- Model already defaults to gpt-4o as requested

These changes ensure the MCP server properly loads API keys from .env files
and creates the appropriate LLM/embedder clients based on configuration.

🤖 Generated with [Claude Code](https://claude.com/claude-code)

Co-Authored-By: Claude <noreply@anthropic.com>

mcp_server/config/config.yaml

@@ -2,7 +2,7 @@
 # This file supports environment variable expansion using ${VAR_NAME} or ${VAR_NAME:default_value}
 
 server:
-  transport: "stdio"  # Options: stdio, sse
+  transport: "sse"  # Options: stdio, sse, http
   host: "0.0.0.0"
   port: 8000
   

mcp_server/src/graphiti_mcp_server.py

@@ -35,7 +35,14 @@ from services.factories import DatabaseDriverFactory, EmbedderFactory, LLMClient
 from services.queue_service import QueueService
 from utils.formatting import format_fact_result
 
-load_dotenv()
+# Load .env file from mcp_server directory
+mcp_server_dir = Path(__file__).parent.parent
+env_file = mcp_server_dir / '.env'
+if env_file.exists():
+    load_dotenv(env_file)
+else:
+    # Try current working directory as fallback
+    load_dotenv()
 
 
 # Semaphore limit for concurrent Graphiti operations.
@@ -118,16 +125,17 @@ class GraphitiService:
             llm_client = None
             embedder_client = None
 
-            # Only create LLM client if API key is available
-            if self.config.llm.providers.openai and self.config.llm.providers.openai.api_key:
+            # Create LLM client based on configured provider
+            try:
                 llm_client = LLMClientFactory.create(self.config.llm)
+            except Exception as e:
+                logger.warning(f'Failed to create LLM client: {e}')
 
-            # Only create embedder client if API key is available
-            if (
-                self.config.embedder.providers.openai
-                and self.config.embedder.providers.openai.api_key
-            ):
+            # Create embedder client based on configured provider
+            try:
                 embedder_client = EmbedderFactory.create(self.config.embedder)
+            except Exception as e:
+                logger.warning(f'Failed to create embedder client: {e}')
 
             # Get database configuration
             db_config = DatabaseDriverFactory.create_config(self.config.database)