Does this issue occur when all extensions are disabled?: Yes, partially I'm using remote development so I can't really disable that extension, this issue does not seem to arise when running in a wsl.

If Python is not working in Visual Studio Code Terminal, you receive Python is not recognized, or the script fails to execute, follow these solutions.

May be similar to #16286 where a future python update resolved the issue, but wanted to expedite an update if required. [NOTE: If you suspect that your issue is related to the Microsoft Python ...