The source license and binary distribution license are different. The source code is MIT licensed; nothing wrong with that. Great license for this. The binaries are provided with a different license that also covers components from third parties that may not be in the vs code repo as well as telemetry and other data gathered.

If for whatever reason you don't like this license, you can build from source. This project seems to do that and remove all of the MS branding and telemetry. There are only a handful of commits on the project so it does not look like it is massive change. The big question is whether that adds enough value and whether this project will make enough effort to keep it's fork up to date.

I agree that for the vast majority of users, using the official binaries should be perfectly fine. MS did a fine job with this product. But nothing wrong with having the choice.