Because if they're just an extension they're stuck with whatever rules Microsoft makes up, and Google is no stranger to using this leverage against others.

Because there are plenty of good reasons why you may want to modify/extend the code and the look and feel beyond what an extension would let you do.

I never understood why people scoff at VS Code forks. I'd honestly tend to be more skeptical of new editors that don't fork VS Code, because then they're probably missing a ton of useful capabilities and are incompatible with all the VSC extensions everyone's gotten used to.