Hey! We rolled out an immediate fix a few days ago and will have a longer term solution out very soon. Thanks all for the reports and support.
TLDR: MSFT has a handful of extensions which are closed-source. (Remote access, Pylance, C/C++, C#). The latest releases of the specific extensions no longer work in Cursor or other non-MSFT editors.
Moving forward, Cursor is transitioning away from these extensions. We are investing in open-source alternatives which already exist in the community and will bundle these into the next version to enable a seamless transition.
Please let us know if you have thoughts or questions! Here to help in anyway we can.