Issues like runaway compiler threads, slow response times, OmniSharp frequently losing the mono-path and requires restart (this is some config issue and interaction with Unity, but could have been handled automatically).
It's sensible to improve the C# experience on VS Code, but not saying the way MS is doing it here is the best way.
Omnisharp would take forever to start up (always downloading a new Omnisharp binary on every restart for some reason?!), type checking was unresponsive to the point of being unusable, and the whole thing would freeze and stop working entirely every once in a while, requiring me to reload the IDE. I tried various versions of Omnisharp (stable/beta) across many C# projects and several vscode deployments on multiple machines and never got it to work well. I eventually decided Omnisharp would never improve and abandoned vscode because of how uniformly bad it was for C#.
I think here's what's going on: It appears VS Code is Microsoft's main IDE and C# is the main language. Not surprised they decided to obtain more control over the integration to improve the experience. In terms of management, it's always easier to cut all the external dependencies (community) and "just do it", even though it's absolutely against the open source spirit and definitely will hurt their community relationships and the trust.
Can't say the decision is an absolute evil.