Text currently says:

Optional array of strings to pass to the language server. Only works if the Dafny version is 3.10 or greater. Available options can be seen using 'dafny server --help'

Except it's not an array, and trying to pass in an array [ "foo", "bar" ] doesn't work.
The UI manages a list of strings, but passing in a string doesn't work: "--solver-path /opt/homebrew/bin/z3"
Then the syntax from the --help message works fine on the command line, but not here: --solver-path /opt/homebrew/bin/z3
The secret happens to be to do --solver-path:/opt/homebrew/bin/z3 with a magical colon, and no spaces, which also works on the command line...

At least make it like:

One or more options to pass to the language server. Enter each option as a separate item. Start an option with its "--" prefix and then a colon and a value, e.g. --solver-path:/opt/homebrew/bin/z3 or --cores:0. Available options can be seen using 'dafny server --help'. Expected (or indeed any) results strictly not guaranteed. Your mileage may vary. Terms and conditions apply. (Only works if the Dafny version is 3.10 or greater.)