FWIW, with and without my changes I couldn't run an E2E test to completion. When launching a task using either the integrated or external terminals, I'd get:

Error processing 'configurationDone' request. Unknown Error: 0x89720010

Still, with my changes I could still verify the change was effective. Without my changes, I'd still get an error using a path like ${env:WINDIR}\System32 that the path \System32 could not be found; however, with my changes, I'd get past that and just get the error above on the development instance.

I set the --extension-dir to my release instance directory to no avail.

@heaths this PR was awesome, neatly done, works great, just tried it out.
Thanks a lot 🍻