If I can provide machine readable documentation on how to get your VSCode environment set up (in the form of a .vscode/extensions.json file), isn't that strictly better than merely human-readable documentation in README.md under a 'Recommended VSCode Extensions to work with this project' header?
No, because that doesn't translate to other IDEs and one user programmatically changing things to suit themselves causes fluff in PRs and diffs. You also can't guarantee every environment is going to respond correctly.
One user programmatically changing things to suit themselves is supposed to do so in their user settings, which has precedence over the checked-in copy. That way, you have the best of both worlds: easy set-up for everyone who wants it but you can override it without touching the VCS.
Yes, project-level (aka workspace) settings generally override user settings.
But then again, language-specific settings will trump all other settings. And that’s one way to override workspace-level settings in your user settings if you want.
If I can provide machine readable documentation on how to get your VSCode environment set up (in the form of a .vscode/extensions.json file), isn't that strictly better than merely human-readable documentation in README.md under a 'Recommended VSCode Extensions to work with this project' header?