Couldn’t it wind up being easy for Cursor and other variants of VS Code to be long run beneficial for VS Code itself? Seems like having a different third party team extending your stuff and testing it, could be hugely valuable, they take risks and move fast, the upstream project gradually learns from what works for the forks, people contribute various other new extensions.
In the age of LLMs, community is worth its weight in platinum, cutting off Cursor just incentivizes them to develop some new better thing with better technology (cough Zed, Ghostty) to compete with VS Code which won’t benefit Microsoft because it’ll be separate. What’s the use in not just open sourcing the C extension? With more people moving off C anyway, might as well get the free community contributions