Per the PR comments, a workaround I've been using is to have VSCodeVim use VSCode's own undo/redo stack (appended to settings.json)

    "vim.normalModeKeyBindingsNonRecursive": [
        {
            "before": ["u"],
            "after": [],
            "commands": [
                {
                    "command": "undo",
                    "args": []
                }
            ]
        },
        {
            "before": ["<C-r>"],
            "after": [],
            "commands": [
                {
                    "command": "redo",
                    "args": []
                }
           ]
       }
  ],