There is one thing I find confusing:
There are total of 3 different places where the layout can be changed, plus also cursor settings as you mention View > Appearance. All of these seem to do slightly little bit different and are not connected to one and other? Why not just keep the one on right side (second image), that one is perfect.
This is on WSL btw.
Version: 2.3.7 (user setup)
VSCode Version: 1.105.1
Commit: 44f52350f2b7b9ee7625cfaade862ff53a016f40
Date: 2025-12-26T20:10:38.803Z
Electron: 37.7.0
Chromium: 138.0.7204.251
Node.js: 22.20.0
V8: 13.8.258.32-electron.0
OS: Windows_NT x64 10.0.19045