1. Have a single folder workspace and a launch configuration in you user settings
2. Notice the error coming from the debug extension how cwd is not absolute
3. I would expect the node extension to try harder to figure out the cwd. For example even if no WorkspaceFolder is passed it could look at the workspace using the vscode API. Or it could look at the active file and based on that determine that

Example launch in user settings:

"launch": {
        "version": "0.2.0",
        "configurations": [
            {
                "type": "node",
                "request": "launch",
                "name": "Launch Program2",
                "program": "${workspaceFolder}/test.js"
            }
        ]
    },