@vue/compiler-sfc errors with Nuxt 4

Version

@nuxtjs/cloudinary v4.0.0
Nuxt v4.0.3

Reproduction Link

https://stackblitz.com/edit/github-q51eyr8z?file=nuxt.config.ts

Steps to reproduce

npm run dev

What is Expected?

The app should start proplery and show the Nuxt welcome screen.

What is actually happening?

Getting 500 errors. First one is the following:

[@vue/compiler-sfc] Failed to resolve extends base type. If this previously worked in 3.2, you can instruct the compiler to ignore this extend by adding /* @vue-ignore / before it, for example: interface Props extends / @vue-ignore */ Base {} Note: both in 3.2 or with the ignore, the properties in the base type are treated as fallthrough attrs at runtime. /home/projects/jvmikjjkpj.github/node_modules/@nuxtjs/cloudinary/dist/runtime/components/CldImage.vue 10 | import { useCldImageUrl } from '../composables/useCldImageUrl' 11 | 12 | export interface CldImageProps extends ImageOptions { | ^^^^^^^^^^^^ 13 | loading?: 'eager' | 'lazy' 14 | fetchPriority?: 'high' | 'low' | 'auto'

I heavily suspect the new tsconfig.json to be the culprit since I just updated the playground demo to Nuxt 4 without changing its tsconfig.json and it worked (both w/ new and and old file structure).
Sadly, tsconfig files are clearly not my strong suit, but I'll hapilly try to assist the best I can if needed.

Reproduce the failure with npm run dev using the linked StackBlitz project. Compare tsconfig.json with the working playground setup, then inspect the CldImage.vue interface around the ImageOptions extension. Done means the Nuxt welcome screen loads without the @vue/compiler-sfc error or 500 responses.