Hi @gfrrankel
My best guess is that you are being affected by the recent change that Microsoft made to the docker/container-tools extension. Since you are running the 2.0.0 version of the Docker extension, I suspect this is the root cause. See this post for more details. Basically, unless you want to switch to the prerelease version of the IDE extension you will need to downgrade the Docker extension for the time being.
I just verified this in my environment with the release version of the IDE extension. Please let me know how it goes.
Drew