Hello Ivar,
In principal we don't support our BASIC extension with the ssh extension made by Microsoft as it's beyond our control and has limitations eg doesn't support AIX (I reported that to MS a while back). However the problem you reported reproduces outside the realm of ssh and can be seen in VS Code installed directly in Linux which we do support. I have logged a bug with reference MVVS-1307 on the nested path creation. If you could log a support ticket on the remaining issues I would be happy to test these as well.