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No? The non-free binary is the client not the server. There are free implementations of the client for Code OSS.

The server installed on the remote machine is part of vscode itself called the REH (remote extension host). It’s the core of the editor running in headless mode on the server.

Here is an example open source implementation of the non-free binary client (it’s a 4 files that call various editor APIs) https://github.com/xaberus/vscode-remote-oss

This is REH entry (the binary installed on the remote machine) https://github.com/microsoft/vscode/tree/main/src/vs/server/...

And responsible for a huge amount of disk usage on our experiments shared machines (due to a bunch of students using vscode, with each user having their own copies of magic binaries). I wonder if there's an easy way to block it...

Corporate IT usually has a relationship and trusts Microsoft already. Not like it’s a small I trusted company.