[BUG] Unable to watch for changes in this large workspace folder

BLOCKED on https://github.com/dotnet/razor/issues/9370

Describe the Issue

When opening a large project (in my specific case a Unity project) I get this error:

Unable to watch for file changes in this large workspace folder. Please follow the instructions link to resolve this issue.

This tool can be used to gather information regarding which files are being listened to:

https://github.com/mikesart/inotify-info

When running ./inotify-info, it shows the offending extensions:

------------------------------------------------------------------------------
INotify Limits:
  max_queued_events    16384
  max_user_instances   128
  max_user_watches     524288
------------------------------------------------------------------------------
       Pid Uid        App                                      Watches  Instances
     46652 1000       Microsoft.VisualStudio.Code.ServiceHost   356368         17
     46043 1000       rzls                                      133820          4
     46390 1000       Microsoft.VisualStudio.Code.Server         33457          3
      3214 1000       tracker-miner-fs-3                           178          1
      3051 1000       systemd                                      152          3
     45999 1000       code                                          46          1

A few interesting things to note:

1. Microsoft.VisualStudio.Code.ServiceHost is watching A LOT of files
2. I am in a Unity project, not a razor project. I have no idea why rzls has started up.
3. My files.watcherExclude setting in VS Code is not being respected.

My files.watcherExclude is currently set to:

    "files.watcherExclude": {
        "**/.git/objects/**": true,
        "**/.git/subtree-cache/**": true,
        "**/node_modules/*/**": true,
        "**/.hg/store/**": true,
        "**/.DS_Store":true,
        "**/.git/**":true,
        "**/.gitmodules":true,
        "**/*.booproj":true,
        "**/*.pidb":true,
        "**/*.suo":true,
        "**/*.user":true,
        "**/*.userprefs":true,
        "**/*.unityproj":true,
        "**/*.dll":true,
        "**/*.exe":true,
        "**/*.pdf":true,
        "**/*.mid":true,
        "**/*.midi":true,
        "**/*.wav":true,
        "**/*.gif":true,
        "**/*.ico":true,
        "**/*.jpg":true,
        "**/*.jpeg":true,
        "**/*.png":true,
        "**/*.psd":true,
        "**/*.tga":true,
        "**/*.tif":true,
        "**/*.tiff":true,
        "**/*.3ds":true,
        "**/*.3DS":true,
        "**/*.fbx":true,
        "**/*.FBX":true,
        "**/*.lxo":true,
        "**/*.LXO":true,
        "**/*.ma":true,
        "**/*.MA":true,
        "**/*.obj":true,
        "**/*.OBJ":true,
        "**/*.cubemap":true,
        "**/*.flare":true,
        "**/*.mat":true,
        "**/*.meta":true,
        "**/*.unity":true,
        "**/*.prefab":true,
        "**/*.asmdef":true,
        "build/":true,
        "Build/":true,
        "Library/":true,
        "library/":true,
        "obj/":true,
        "Obj/":true,
        "temp/":true,
        "Temp/":true,
        "**/Gitignore/**":true,
        "**/builds/**":true
    }

When running ./inotify-info Microsoft.VisualStudio.Code.ServiceHost we can see the specific files it is listening to which includes many that are supposed to be excluded such as:

 58486303 [259:6] /home/tcroc/dev/BlockyBall/.git/lfs/objects/d5/63/
 58486304 [259:6] /home/tcroc/dev/BlockyBall/.git/lfs/objects/d7/8c/
 58486305 [259:6] /home/tcroc/dev/BlockyBall/.git/lfs/objects/84/eb/
 58486306 [259:6] /home/tcroc/dev/BlockyBall/.git/lfs/objects/2a/8e/
 58486307 [259:6] /home/tcroc/dev/BlockyBall/.git/lfs/objects/dc/bc/

Steps To Reproduce

1. Create a Unity Project (or probably any kind of project)
2. Initialize a git repo in the project.
3. Set the vs code setting files.watcherExclude to exclude some files and directories.
4. See that is not being respected and instead A LOT of files are being listened to.

Expected Behavior

The files and directories in files.watcherExclude should not be listened to.

Environment Information

• OS: Linux
• VS Code Version: 1.81.0
• Extension: C# Dev Kit 0.3.21
• Extension: C# 2.0.328
• Extension: Unity 0.9.0

Read the linked blocking issue dotnet/razor#9370 first, then reproduce the Unity workspace steps on Linux with the listed VS Code extensions and files.watcherExclude settings. Run inotify-info and compare the watched paths with the configured exclusions. Done means excluded files and directories are no longer watched and the large-workspace warning is resolved.