We have tried several configurations, but so far, we cannot reproduce the issue.
Note that our VSCode installed vscode-server after first opening the remote connection (SSH on Ubuntu), which is essential for VSCode to work properly (but I guess you have it as well).
Here is the simple test;
I'd appreciate it if you could help us during a quick Zoom meeting (or any remote desktop share app of your choice). Please let me know at jakub@devsense.com the date/time that would work for you. Thank you.