One quirk that's always bugged me is that ⌥+. doesn't work in VSCode terminal (to repeat the last parameter of the previous command, cycling through history). Also any ⌥ combination. Found the solution this morning

{
"terminal.integrated.macOptionIsMeta": true,
"terminal.integrated.sendKeybindingsToShell": true
}

https://github.com/microsoft/vscode/issues/242900#issuecomment-2967118381