GitLab PM and author of the OP here.

It is an interesting position we find ourselves in and we had some lively discussions about it! I would like to note, though, that Monaco (which powers our current Web IDE) is ALSO a Microsoft project. So this isn't a change in strategy as it relates to using open source projects maintained by those that may be seen as competitors.

We have faith in the future of VS Code as an open source project but I'll also say that this isn't a one-way door. If things change in the future, we're not so heavily leveraged that we couldn't replace the Web IDE's underlying editor again.