Does this issue occur when all extensions are disabled?

Yes

VS Code Version

Version: 1.99.3
Commit: 17baf841131aa23349f217ca7c570c76ee87b957
Date: 2025-04-15T23:18:46.076Z
Electron: 34.3.2
ElectronBuildId: 11161073
Chromium: 132.0.6834.210
Node.js: 20.18.3
V8: 13.2.152.41-electron.0
OS: Linux x64 6.14.4-300.fc42.x86_64

It's code-1.99.3-1744761644.el8.x86_64:

1. #!/usr/bin/env sh
   dnf5 --refresh info 'code'

2. Name            : code
   Epoch           : 0
   Version         : 1.99.3
   Release         : 1744761644.el8
   Architecture    : x86_64
   Installed size  : 400.4 MiB
   Source          : code-1.99.3-1744761644.el8.src.rpm
   From repository : <unknown>
   Vendor          : Microsoft Corporation

OS Version

1. #!/usr/bin/env pwsh
   #Requires -PSEdition Core
   Get-Content -LiteralPath '/etc/os-release' | Select-String -SimpleMatch 'CPE_NAME'

2. CPE_NAME="cpe:/o:fedoraproject:fedora:42"

Steps to Reproduce

1. Configure the OS & DE to match my kinfo output (which should be the default state of the Fedora Workstation's KDE Spin):

   KDE Plasma Version: 6.3.4
   KDE Frameworks Version: 6.13.0
   Qt Version: 6.9.0
   Kernel Version: 6.14.4-300.fc42.x86_64 (64-bit)
   Graphics Platform: Wayland

2. #!/usr/bin/env sh
   touch '/home/file.txt' && \
   sudo chown root:root '/home/file.txt'
   code '/home/file.txt'

3. Resize the window at, then below, 637 × 362 px:

   1. 

   2. 

   ¹