How to debug a VS Code extension using CursorAI

I have had the same issue.
Check out what vscode version cursor is using from the about menu
mine uses 1.93.1 while the hello world example auto-generated defaulted to 1.96.0
The solution was to downgrade the following in package.json and npm install again

...
  "engines": {
    "vscode": "^1.93.0"
  },
...
"devDependencies": {
    "@types/vscode": "^1.93.0",
...

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