I agree overall, but I don't think it'll be VS Code in the browser, I think VS Code's remote features with the client-server model (client: VS Code's UI running locally, and server: the code executing and file-system running on the server).

I've also tried VS Code in the browser, and personally I find it an absolute unusable mess, the key binding space is just way to overloaded for a complex app like VS Code, and the browser itself to co-exist (e.g., many of VS Code's important bindings get eaten by the browser itself). I think that all that really matters is that the UI for complex apps runs locally.

(But I could be wrong here, I don't make the mistake of extrapolating my own experiences to other users. E.g., I also find VS Code to be so slow I avoid, but most users couldn't care less. https://news.ycombinator.com/item?id=27360494)