My understanding is that that plugin is proprietary and only works on official MS builds of VS Code. There don’t appear to be official builds for Linux on arm64

My understanding is that that plugin is proprietary and only works on official MS builds of VS Code. There don’t appear to be official builds for Linux on arm64, so I suspect you may not be able to run this on a Pi. But yeah sshfs would work, of course, as would e.g. Emacs’s TRAMP mode.