`--diff` on workspace files opens the workspace instead of diff-ing them

Similar to https://github.com/microsoft/vscode/issues/149731

• VSCode Version:

  Version: 1.70.0-insider (user setup)
  Commit: 1cd90cceddf3c413673963ab6f154d2ff294b17c
  Date: 2022-07-15T05:16:39.110Z
  Electron: 18.3.5
  Chromium: 100.0.4896.160
  Node.js: 16.13.2
  V8: 10.0.139.17-electron.0
  OS: Windows_NT x64 10.0.22622
  

• Local OS Version: Win 11
• Remote OS Version: Ubuntu 22.04 WSL
• Remote Extension/Connection Type: WSL

[2022-07-15 17:04:26.286] Resolving wsl+Ubuntu, resolveAttempt: 1
[2022-07-15 17:04:26.401] Starting VS Code Server inside WSL (wsl2)
[2022-07-15 17:04:26.401] Extension version: 0.66.3
[2022-07-15 17:04:26.401] Windows build: 22622. Multi distro support: available. WSL path support: enabled
[2022-07-15 17:04:26.402] No shell environment set or found for current distro.
[2022-07-15 17:04:26.543] Connecting to daemon started by other Remote-WSL window... 5.10.102.1-microsoft-standard-WSL2 Ubuntu
[2022-07-15 17:04:26.544] WSL resolver response: 127.0.0.1:64072
[2022-07-15 17:04:26.544] To debug connection issues, open a local browser on http://127.0.0.1:64072/version
[2022-07-15 17:04:26.544] Using 'wslExeProxy' to connect to the VS Code server as configured by setting 'remote.WSL2.connectionMethod'
[2022-07-15 17:04:26.544] 'wslExeProxy' should fix reconnection issues after sleep and network adapter changes.
[2022-07-15 17:04:26.544] Please report issues related with the new setting to https://github.com/microsoft/vscode-remote-release/issues/5894
[2022-07-15 17:04:26.544] To revert back to the old way of connecting, change setting 'remote.WSL2.connectionMethod' to 'wsl2VMAddress'.

Steps to Reproduce:

1. Open an empty folder in VS Code Remote (WSL/SSH/Docker)

2. Create two workspace files (e.g. test.code-workspace and test2.code-workspace)
   test.code-workspace

   {
       "folders": [
           {
               "path": "."
           }
       ],
       "settings": {}
   }
   

   test2.code-workspace

   {
       "folders": [
           {
               "path": "."
           }
       ],
       "settings": {
           "php.suggest.basic": false
       }
   }
   

3. Attempt to diff them from the integrated terminal

   code --diff  test.code-workspace test2.code-workspace
   

4. VS Code will attempt to open the first workspace in a new window instead of opening a diff of the files in the current window.

Does this issue occur when you try this locally?: No (fixed in latest insiders)

Does this issue occur when you try this locally and all extensions are disabled?: No (fixed in latest insiders)

I usually run into this issue when using code as my difftool.

Example config:

[core]
	  editor = code-insiders --wait
[diff]
	  tool = vscode
[difftool "vscode"]
	  cmd = code-insiders --wait --diff $LOCAL $REMOTE
[merge]
	  tool = vscode
[mergetool "vscode"]
	  cmd = code-insiders --wait $MERGED