Use a different vscode user-data-dir for every project.

Treat workspace setting files as global for that user-data-dir with symlink.
Add updateLaunchCmd to update .vscode/launch.json.

pkgs/misc/vscode-extensions/updateSettings.nix

@@ -9,6 +9,8 @@
 # if marked as true will create an empty json file if does not exists
 , createIfDoesNotExists ? true
 , vscodeSettingsFile ? ".vscode/settings.json"
+, userSettingsFolder ? ""
+, symlinkFromUserSetting ? false
 }:
 let
 
@@ -20,13 +22,18 @@ let
   )'';
 
   createEmptySettingsCmd = ''mkdir -p .vscode && echo "{}" > ${vscodeSettingsFile}'';
+  fileName = builtins.baseNameOf vscodeSettingsFile;
+  symlinkFromUserSettingCmd = lib.optionalString symlinkFromUserSetting
+    '' && mkdir -p "${userSettingsFolder}" && ln -sfv "$(pwd)/${vscodeSettingsFile}" "${userSettingsFolder}/" '';
 in 
 
-  writeShellScriptBin ''vscodeNixUpdate-${lib.removeSuffix ".json" (builtins.baseNameOf vscodeSettingsFile)}''
+  writeShellScriptBin ''vscodeNixUpdate-${lib.removeSuffix ".json" (fileName)}''
   (lib.optionalString (settings != {}) 
-  (if createIfDoesNotExists then ''
-    [ ! -f "${vscodeSettingsFile}" ] && ${createEmptySettingsCmd}
-    ${updateVSCodeSettingsCmd}
-  ''
-  else ''[ -f "${vscodeSettingsFile}" ] && ${updateVSCodeSettingsCmd}''
-  ))
+    (if createIfDoesNotExists then ''
+      [ ! -f "${vscodeSettingsFile}" ] && ${createEmptySettingsCmd}
+      ${updateVSCodeSettingsCmd} ${symlinkFromUserSettingCmd}
+    ''
+    else ''[ -f "${vscodeSettingsFile}" ] && ${updateVSCodeSettingsCmd} ${symlinkFromUserSettingCmd}
+    ''
+    )
+  )

pkgs/misc/vscode-extensions/vscode-utils.nix

@@ -1,9 +1,13 @@
 { stdenv, lib, buildEnv, writeShellScriptBin, fetchurl, vscode, unzip, jq }:
 
 let
+  extendedPkgVersion = lib.getVersion vscode;
+  extendedPkgName = lib.removeSuffix "-${extendedPkgVersion}" vscode.name;
+
 
   buildVscodeExtension = a@{
     name,
+    namePrefix ? "${extendedPkgName}-extension-",
     src,
     # Same as "Unique Identifier" on the extension's web page.
     # For the moment, only serve as unique extension dir.
@@ -17,12 +21,12 @@ let
   }:
   stdenv.mkDerivation ((removeAttrs a [ "vscodeExtUniqueId" ]) //  {
 
-    name = "vscode-extension-${name}";
+    name = namePrefix + name;
 
     inherit vscodeExtUniqueId;
     inherit configurePhase buildPhase dontPatchELF dontStrip;
 
-    installPrefix = "${vscodeExtUniqueId}";
+    installPrefix = "share/${extendedPkgName}/extensions/${vscodeExtUniqueId}";
 
     buildInputs = [ unzip ] ++ buildInputs;
 

pkgs/misc/vscode-extensions/vscodeEnv.nix

@@ -13,9 +13,12 @@
 # will add to the command updateSettings (which will run on executing vscode) settings to override in settings.json file
 , settings                         ? {}
 , createSettingsIfDoesNotExists    ? true
+, launch                           ? {}
+, createLaunchIfDoesNotExists      ? true
 # will add to the command updateKeybindings(which will run on executing vscode) keybindings to override in keybinding.json file
 , keybindings                      ? {}
 , createKeybindingsIfDoesNotExists ? true
+, user-data-dir ? ''"''${TMP}''${name}"/vscode-data-dir''
 # if file exists will use it and import the extensions in it into this dervation else will use empty extensions list
 # this file will be created/updated by vscodeExts2nix when vscode exists
 , mutableExtensionsFile 
@@ -29,20 +32,35 @@ let
     vscodeDefault = vscode;
   }
   {
-    inherit nixExtensions mutableExtensions vscodeExtsFolderName;
+    inherit nixExtensions mutableExtensions vscodeExtsFolderName user-data-dir;
   };
 
   updateSettings = import ./updateSettings.nix { inherit lib writeShellScriptBin jq; };
+  userSettingsFolder = "${ user-data-dir }/User";
 
   updateSettingsCmd = updateSettings {
-    inherit settings;
+    settings = {
+        "extensions.autoCheckUpdates" = false;
+        "extensions.autoUpdate" = false;
+        "update.mode" = "none";
+    } // settings;
+    inherit userSettingsFolder;
     createIfDoesNotExists = createSettingsIfDoesNotExists;
+    symlinkFromUserSetting = (user-data-dir != "");
+  };
+
+  updateLaunchCmd = updateSettings {
+    settings = launch;
+    createIfDoesNotExists = createLaunchIfDoesNotExists;
+    vscodeSettingsFile = ".vscode/launch.json";
   };
 
   updateKeybindingsCmd = updateSettings {
     settings = keybindings;
     createIfDoesNotExists = createKeybindingsIfDoesNotExists;
     vscodeSettingsFile = ".vscode/keybindings.json";
+    inherit userSettingsFolder;
+    symlinkFromUserSetting = (user-data-dir != "");
   };
 
   vscodeExts2nix = import ./vscodeExts2nix.nix { 
@@ -55,6 +73,7 @@ let
   };
   code = writeShellScriptBin "code" ''
     ${updateSettingsCmd}/bin/vscodeNixUpdate-settings
+    ${updateLaunchCmd}/bin/vscodeNixUpdate-launch
     ${updateKeybindingsCmd}/bin/vscodeNixUpdate-keybindings
     ${vscodeWithConfiguration}/bin/code --wait "$@" 
     echo 'running vscodeExts2nix to update ${mutableExtensionsFilePath}...'
@@ -63,5 +82,5 @@ let
 in
 buildEnv {
   name = "vscodeEnv";
-  paths = [ code vscodeExts2nix updateSettingsCmd updateKeybindingsCmd ];
+  paths = [ code vscodeExts2nix updateSettingsCmd updateLaunchCmd updateKeybindingsCmd ];
 }

pkgs/misc/vscode-extensions/vscodeWithConfiguration.nix

@@ -11,6 +11,7 @@
 # extensions to be copied into the project's extensions folder
 , mutableExtensions    ? []        
 , vscodeExtsFolderName ? ".vscode-exts"        
+, user-data-dir ? ''"''${TMP}vscodeWithConfiguration/vscode-data-dir"''
 }:
 let 
   nixExtsDrvs = extensionsFromVscodeMarketplace nixExtensions;
@@ -39,9 +40,11 @@ let
 in
   writeShellScriptBin "code" ''
     if ! [[ "$@" =~ "--list-extension" ]]; then 
-      mkdir -p ${vscodeExtsFolderName} 
+      mkdir -p "${vscodeExtsFolderName}" 
       ${rmExtensions}
       ${cpExtensions}
     fi
-    ${vscode}/bin/code --extensions-dir ${vscodeExtsFolderName} "$@"
+    ${vscode}/bin/code --extensions-dir "${vscodeExtsFolderName}" ${ 
+      lib.optionalString (user-data-dir != "") ''--user-data-dir ${user-data-dir }''
+      } "$@"
   ''