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With WSL2 I got rid of VM's for local development.

Cross OS filesystem performance is poor. The solution is to keep everything within WSL. Code stored, built & edited in WSL.

VSCode + WSL extension makes it possible to "edit" from host without loosing performance.

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>With WSL2 I got rid of VM's for local development.

No you didn't, you just let Windows hide them from you. WSL2 is essentially a Hyper-V VM running Linux with some programs bridging between it and the Windows host -- or two such VMs with some additional bridging (for Wayland and audio) if WSLg is enabled.

Installing WSL2 has the weird side-effect of somehow breaking other Hyper-V VMs like some android emulators.

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