I love that post, because it encapsulates exactly the kind of internal logic that traps not-fully-open organizations.
MS can't open source the remote Dev extensions, because the service that runs it (and much of the client code) comes from other, proprietary offerings and codebases. More concretely, they come from other teams that aren't used to open source, are discouraged from getting used to it, and/or don't have approval from legal to release code in the open.
This is not an EEE trap, this is normal bureaucracy for an organization the size of MS. Consider that for almost all of VSCode's lifetime, the OSS version has been perfectly full featured, only missing telemetry and copyrighted brand marks. Remote Dev extensions are less than a year old.
They have the same problem with the C# debugger: owned by a proprietary team, can't get permission to open source it.
It is extremely hard to open source "some" or "most" of your code, especially in a company whose USP is tight integration between pieces. The legal quagmires are horrendous. A tool that crosses so many lines, like an integrated IDE, are backed into positions like this.
Disclosure: I work for Microsoft in a totally unrelated department.
Also, fwiw i'm a lifetime vim devotee... used it as my primary IDE for a long time and still use it daily. But vscode won me over exactly with the remote code extensions. Now it's the only proprietary software on my toolchain (apart from my BIOS).