"(...) every time an install of Raspberry Pi OS is updated it will ping a Microsoft server. Microsoft will know you're using Raspberry Pi OS/likely Raspberry Pi owner and your IP address."
How is this is an issue? It doesn't require any login and this is exactly what happens with every APT mirror.
I imagine that Raspberry Pi OS is an distro meant for people who simply want things to work out of the box, I can see why the Raspberry foundation would want to add repos for easy installation of the VSCode.
If you want tight control of what happens in your system, you are free to install any other distro you want.