Having installed the 'pico' extension (v0.16.2) into VSCode 1.93.1 the icons for both the Raspberry Pi Pico project and the MicroPico Device Controller can be seen in the left-hand toolbar.
I select 'New Project From Example' from the Pi Pico Quick Access menu, then 'blink' and Pico, leaving the other settings to default.
When I click 'Create' the extension issues the message 'Failed to setup example' - no other details seem to be available, but I am happy to provide any other information that you may require to investigate further.
I have tried on another system running the same version of VSCode and the new project is created successfully.