There is a huge difference between running sshfs and vscode remote. vscode remote tries to completely put the user on the remote machine, the terminal, the environment and anything else the remote box has access to the user can work with it. It allows me to connect to my dev environment (remote box) from any PC, or with the right setup even a browser.
In my team this allowed us to setup a consistent dev environment where everyone has access to the same specs, same environment, easy to manage access control sensitive systems from that remote machine on forward etc... sshfs or using sftp that many of the older IDEs did, don't come close to making it so seamless.
I must have been doing something different then. Ages ago we had devs using remote vns, shell in and also remote mount and then run and debug, they could work from office or home or road; consistent devenv. Granted we had to have cfEngine (then Puppet IIRC) help us. In 2026 we've got containers for almost everything but, I still work with some legacy-ass systems doing things this way. We've added more ceremony and more code but, the workflow is not significantly improved, IMO. I don't get new features, just nee ways of doing the same old.