When using the latest two versions of the Python extension inside Visual Studio Code, then instead of VS Code showing up when you click "Edit" or "Debug" inside the "Script and Add-Ins" dialog, another instance of Fusion 360 will come up 😬
Fortunately, you can simply downgrade back to version 2019.9.34911 of the Python extension to solve the problem:
- go to the Extensions tab in VS Code
- click on the Settings button ⚙ of the Python extension
- select "Install Another Version..."
- select 2019.9.34911