New dev container hangs and never completes

Trying to just create a dev container without an associated folder or repo hangs.

• VSCode Version: 1.89.1 and Insiders 1.90.0
• Local OS Version: Windows 11 Pro 23H2
• Remote OS Version: NA
• Remote Extension/Connection Type: Containers

• Logs:

[692 ms] Dev Containers 0.366.0 in VS Code 1.89.1 (dc96b837cf6bb4af9cd736aa3af08cf8279f7685).
[691 ms] Initializing configuration support...
[692 ms] Internal initialization of dev container support package...
[3534 ms] Start: Run: docker version --format {{json .}}
[3584 ms] {"Client":{"Version":"25.0.4-rd","ApiVersion":"1.44","DefaultAPIVersion":"1.44","GitCommit":"c4cd0a9","GoVersion":"go1.21.8","Os":"windows","Arch":"amd64","BuildTime":"Fri Mar  8 09:11:41 2024","Context":"default"},"Server":{"Platform":{"Name":""},"Components":[{"Name":"Engine","Version":"25.0.3","Details":{"ApiVersion":"1.44","Arch":"amd64","BuildTime":"Wed Mar  6 12:07:44 2024","Experimental":"false","GitCommit":"f417435e5f6216828dec57958c490c4f8bae4f98","GoVersion":"go1.21.8","KernelVersion":"5.15.146.1-microsoft-standard-WSL2","MinAPIVersion":"1.24","Os":"linux"}},{"Name":"containerd","Version":"v1.7.10","Details":{"GitCommit":"4e1fe7492b9df85914c389d1f15a3ceedbb280ac"}},{"Name":"runc","Version":"1.1.12","Details":{"GitCommit":"51d5e94601ceffbbd85688df1c928ecccbfa4685"}},{"Name":"docker-init","Version":"0.19.0","Details":{"GitCommit":""}}],"Version":"25.0.3","ApiVersion":"1.44","MinAPIVersion":"1.24","GitCommit":"f417435e5f6216828dec57958c490c4f8bae4f98","GoVersion":"go1.21.8","Os":"linux","Arch":"amd64","KernelVersion":"5.15.146.1-microsoft-standard-WSL2","BuildTime":"2024-03-06T12:07:44.000000000+00:00"}}
[3586 ms] Start: Run: docker -v
[3634 ms] Start: Run: docker events --format {{json .}} --filter event=create --filter event=destroy --filter event=die --filter event=health-status --filter event=kill --filter event=pause --filter event=rename --filter event=resize --filter event=restart --filter event=start --filter event=stop --filter event=unpause --filter event=update --filter event=exec_create
[3647 ms] Start: Run: docker ps -q -a
[3648 ms] Start: Run: docker version --format {{json .}}
[3705 ms] Start: Run: docker inspect --type container 6acd0132193b
[3706 ms] {"Client":{"Version":"25.0.4-rd","ApiVersion":"1.44","DefaultAPIVersion":"1.44","GitCommit":"c4cd0a9","GoVersion":"go1.21.8","Os":"windows","Arch":"amd64","BuildTime":"Fri Mar  8 09:11:41 2024","Context":"default"},"Server":{"Platform":{"Name":""},"Components":[{"Name":"Engine","Version":"25.0.3","Details":{"ApiVersion":"1.44","Arch":"amd64","BuildTime":"Wed Mar  6 12:07:44 2024","Experimental":"false","GitCommit":"f417435e5f6216828dec57958c490c4f8bae4f98","GoVersion":"go1.21.8","KernelVersion":"5.15.146.1-microsoft-standard-WSL2","MinAPIVersion":"1.24","Os":"linux"}},{"Name":"containerd","Version":"v1.7.10","Details":{"GitCommit":"4e1fe7492b9df85914c389d1f15a3ceedbb280ac"}},{"Name":"runc","Version":"1.1.12","Details":{"GitCommit":"51d5e94601ceffbbd85688df1c928ecccbfa4685"}},{"Name":"docker-init","Version":"0.19.0","Details":{"GitCommit":""}}],"Version":"25.0.3","ApiVersion":"1.44","MinAPIVersion":"1.24","GitCommit":"f417435e5f6216828dec57958c490c4f8bae4f98","GoVersion":"go1.21.8","Os":"linux","Arch":"amd64","KernelVersion":"5.15.146.1-microsoft-standard-WSL2","BuildTime":"2024-03-06T12:07:44.000000000+00:00"}}
[3708 ms] Start: Run: docker -v
[3755 ms] Start: Run: docker events --format {{json .}} --filter event=destroy --filter event=die --filter event=kill --filter event=create --filter event=rename --filter event=resize --filter event=restart --filter event=start --filter event=stop --filter event=unpause --filter event=prune
[3768 ms] Start: Run: docker volume ls -q
[3825 ms] Start: Run: docker inspect --type volume tailsshale-main-484e6f0ce03c9473996b81a058111c50fb54923dbae3e422e91385e708994cd4 ubuntu
[5416 ms] Start: Run: docker inspect --type container 6acd0132193b6776d85de8e5e4de1800bf2413f4a7fa02180c18938b853c3b54
[6571 ms] Start: Run: docker inspect --type container 6acd0132193b6776d85de8e5e4de1800bf2413f4a7fa02180c18938b853c3b54
[6620 ms] Start: Run: docker stop 6acd0132193b6776d85de8e5e4de1800bf2413f4a7fa02180c18938b853c3b54
[6674 ms] Start: Run: docker inspect --type container 6acd0132193b6776d85de8e5e4de1800bf2413f4a7fa02180c18938b853c3b54
[8007 ms] Start: Run: docker ps -q -a
[8056 ms] Start: Run: docker inspect --type container 6acd0132193b
[16682 ms] Start: Run: docker inspect --type container 6acd0132193b6776d85de8e5e4de1800bf2413f4a7fa02180c18938b853c3b54
[17106 ms] Start: Run: docker inspect --type container 6acd0132193b6776d85de8e5e4de1800bf2413f4a7fa02180c18938b853c3b54
[17107 ms] Start: Run: docker rm 6acd0132193b6776d85de8e5e4de1800bf2413f4a7fa02180c18938b853c3b54
[17111 ms] Start: Run: docker volume ls -q
[17164 ms] Start: Run: docker inspect --type volume tailsshale-main-484e6f0ce03c9473996b81a058111c50fb54923dbae3e422e91385e708994cd4 ubuntu
[17180 ms] Start: Run: docker ps -q -a
[17385 ms] Start: Run: docker volume ls -q
[17387 ms] Start: Run: docker ps -q -a
[17434 ms] Start: Run: docker inspect --type volume tailsshale-main-484e6f0ce03c9473996b81a058111c50fb54923dbae3e422e91385e708994cd4 ubuntu
[87961 ms] Start: Run: docker volume ls -q -f dangling=true -f label=vsch.local.repository
[88006 ms] Start: Run: docker volume ls -q -f dangling=true -f label=dev.container.volume
[88051 ms] Start: Run: docker inspect --type volume tailsshale-main-484e6f0ce03c9473996b81a058111c50fb54923dbae3e422e91385e708994cd4 ubuntu
[90174 ms] Start: Run: docker volume rm tailsshale-main-484e6f0ce03c9473996b81a058111c50fb54923dbae3e422e91385e708994cd4 ubuntu
[90220 ms] Start: Run: docker volume ls -q
[90221 ms] Start: Run: docker ps -q -a
[90423 ms] Start: Run: docker ps -q -a
[90424 ms] Start: Run: docker volume ls -q
[94504 ms] Start: Run: docker version --format {{json .}}
[94550 ms] {"Client":{"Version":"25.0.4-rd","ApiVersion":"1.44","DefaultAPIVersion":"1.44","GitCommit":"c4cd0a9","GoVersion":"go1.21.8","Os":"windows","Arch":"amd64","BuildTime":"Fri Mar  8 09:11:41 2024","Context":"default"},"Server":{"Platform":{"Name":""},"Components":[{"Name":"Engine","Version":"25.0.3","Details":{"ApiVersion":"1.44","Arch":"amd64","BuildTime":"Wed Mar  6 12:07:44 2024","Experimental":"false","GitCommit":"f417435e5f6216828dec57958c490c4f8bae4f98","GoVersion":"go1.21.8","KernelVersion":"5.15.146.1-microsoft-standard-WSL2","MinAPIVersion":"1.24","Os":"linux"}},{"Name":"containerd","Version":"v1.7.10","Details":{"GitCommit":"4e1fe7492b9df85914c389d1f15a3ceedbb280ac"}},{"Name":"runc","Version":"1.1.12","Details":{"GitCommit":"51d5e94601ceffbbd85688df1c928ecccbfa4685"}},{"Name":"docker-init","Version":"0.19.0","Details":{"GitCommit":""}}],"Version":"25.0.3","ApiVersion":"1.44","MinAPIVersion":"1.24","GitCommit":"f417435e5f6216828dec57958c490c4f8bae4f98","GoVersion":"go1.21.8","Os":"linux","Arch":"amd64","KernelVersion":"5.15.146.1-microsoft-standard-WSL2","BuildTime":"2024-03-06T12:07:44.000000000+00:00"}}
[94552 ms] Start: Run: docker pull alpine:3.16.3
[94822 ms] Start: Run: docker volume ls -q
[97794 ms] Start: Run: docker volume create --label dev.container.volume=true ubuntu
[97841 ms] Start: Run: docker volume ls -q
[97842 ms] Start: Run: docker ps -q -a
[97843 ms] Start: Run: docker run -d --mount type=volume,src=ubuntu,dst=/workspaces alpine:3.16.3 sleep infinity
[97934 ms] Start: Run: docker inspect --type volume ubuntu
[98146 ms] Start: Run: docker ps -q -a
[98146 ms] Start: Run: docker volume ls -q
[98194 ms] Start: Run: docker inspect --type volume ubuntu
[98211 ms] Start: Run: docker inspect --type container a5fcf67bc71a
[98321 ms] Preparing to apply Template 'ghcr.io/devcontainers/templates/ubuntu:latest'
[98323 ms] Running Dev Containers CLI:   templates apply --workspace-folder C:\Users\evilh\AppData\Local\Temp\tmp-output-dir-1715903376522 --template-id ghcr.io/devcontainers/templates/ubuntu:latest --template-args {} --features [] --tmp-dir C:\Users\evilh\AppData\Local\Temp\tmp-dir-1715903376522 --log-level debug
[98326 ms] ProxyResolver#loadSystemCertificates count
[98328 ms] ProxyResolver#loadSystemCertificates count filtered
[98329 ms] Start: Run: C:\Users\evilh\AppData\Local\Programs\Microsoft VS Code\Code.exe c:\Users\evilh\.vscode\extensions\ms-vscode-remote.remote-containers-0.366.0\dist\spec-node\devContainersSpecCLI.js templates apply --workspace-folder C:\Users\evilh\AppData\Local\Temp\tmp-output-dir-1715903376522 --template-id ghcr.io/devcontainers/templates/ubuntu:latest --template-args {} --features [] --tmp-dir C:\Users\evilh\AppData\Local\Temp\tmp-dir-1715903376522 --log-level debug
[98531 ms] [2024-05-16T23:49:36.730Z] @devcontainers/cli 0.60.0. Node.js v18.18.2. win32 10.0.22631 x64.
[98536 ms] [2024-05-16T23:49:36.735Z] Loading 50 extra certificates from C:\Users\evilh\AppData\Local\Temp\vsch\certificates-9b3207a1811c345e81b95e721f2c3bebc32924a0050cf938fcb28057258a1684.pem.
[98702 ms] [2024-05-16T23:49:36.901Z] Start: Run: docker-credential-wincred get
[98730 ms] [2024-05-16T23:49:36.929Z] Stop (28 ms): Run: docker-credential-wincred get
[99290 ms] [2024-05-16T23:49:37.489Z] Replacing imageVariant with jammy

Steps to Reproduce:

1. Open the command pallete and run Dev Containers: New Dev Container
2. Select any template, for example Ubuntu
3. Press Enter and watch it hit the logs above and then just do nothing. I used a fresh install of Rancher Desktop with and without Kubernetes installed. Same thing happens on release and a fresh insiders install with only the prerelease dev containers extension.

Does this issue occur when you try this locally?: Yes
Does this issue occur when you try this locally and all extensions are disabled?: Yes