E.g. editing a config on an embedded device such as a router, editing a file inside a docker container, editing a file on a headless server, etc etc.
The only reasonable use case I can see for the vscode approach is if you're SSHing into your main development machine from another machine.
The remote server requirements include
> 1 GB RAM is required for remote hosts, but at least 2 GB RAM and a 2-core CPU is recommended.
That's pretty far from the SSH+vi use case that TRAMP replaces.
FWIW it is a one-time download on the remote, but still feels yucky, esp. for resource constrained settings (Pi like you mentioned, but also quota-limited containers etc.)
Fair enough :)
DevOps can tell them no all day long, they'll think they know better and give in to convenience over security every time.
What one could do is to block the download of VS Code on all infrastructure.