Hey thanks for the comment, the work from https://github.com/bjoaquinc/mcp-error-formatter is great. I will definitely put some version of this into one of the next releases. Just opened an issue mentioning this thread.
The problem with the package above is that it is server side, and I think it should be. Server is the one that knows (has responsibility to know) if a tool is retryable and has informations about the error, and fairly so.
I see though how some sort of improved error formatting could be introduced in the client as well, but it shouldn't contain any logic about the error, rather format the error in the best way possible (in the direction in which it is best understandable by LLMs).