I was having the same problem. I think the issue is the version of LaTeX Workshop: you are using v10.7.5, which requires VS Code 1.96.0, however, your version of Cursor (0.44.11) is using VS Code 1.93.1.
A workaround that worked for me was to downgrade the version of LaTeX Workshop to v10.7.1.
I guess that when Cursor updates its version of VS Code, the problem will get automatically solved and we will be able to use again the latest version of Latex Workshop.
I was having the same problem and I solved it by downgrading Latex Workshop to v10.7.1.
On a side note, in VS Code with 1.96.0 and Latex Workshop v10.7.5 it works perfectly fine.