I have been having issues connecting to a node through VS-Code since Sunday as well. I attempted deleting the .vscode-server folder, and followed the instructions for the new ssh-key setup ([Authentication] modification sshPublicKey managment)
It is able to connect briefly, but as soon as I try to open a file, it attempts a reconnect.
I am attaching the dump for your persual (VS-Code ssh dump - Pastebin.com)