Doesn't use default wsl distro on Windows with vscode extension

What version of the IDE extension are you using?

26.5309.31024

What subscription do you have?

Plus

Which IDE are you using?

VS Code

What platform is your computer?

Microsoft Windows NT 10.0.19045.0 x64

What issue are you seeing?

I have installed both archlinux and Ubuntu on wsl. archlinux is set as default. The Windows Codex app happily uses the default one (archlinux), but VS code extension uses Ubuntu.

If I remove Ubuntu, so that I only have archlinux, or have it installed with a different name (Ubuntu2) VS code extension doesn't seem to use wsl at all. It seems to be hardcoded to look for Ubuntu.

What steps can reproduce the bug?

wsl --install archlinux
wsl --install Ubuntu

wsl --set-default archlinux

Then inside the Windows Codex app ask it to "run cat /etc/os-release", it is running Arch Linux.
Then the same in VS code extension, it is running Ubuntu.

What is the expected behavior?

It should use the default distro in both cases, not be hardcoded to Ubuntu in the IDE.

Additional information

_No response_