However, it's fine to modify files stored in your Windows filesystem from within Bash, so if you were in `/mnt/c/dev/project/` and launched `code.exe ./`, Code would open the current (Windows-accessible) folder.
There is some weirdness with the recommended file system sharing. Git on WSL sees files as modified after they have been checked in from Windows. It means I either use Git from the IDE or from the terminal, but not both.
Excited to see how this continues to improve.
What you're seeing with git is likely to be caused by line ending differences. You've probably got "Convert line endings to Windows" configured in your Git on Windows, but "Checkout Linux line endings on Linux". Either way, both should match otherwise all your files will look different because ... well ... they will be ;)
For example, using windows explorer to edit linux sub-system files would be a big no-no.