Failure to load workspace from VS Code in FHS on NixOS

Has something changed in the way the VS Code extension launches the rust-analyzer server, in the last few months?

I'm running VS code on NixOS using an FHS setup so that VS Code and its extensions see what looks like a normal Linux. When I last used it a few months ago, rust-analzer worked perfectly in this setup, but when I went back to it yesterday (with updated VS Code and extensions), rust-analyzer now fails to load the workspace with error

cd "/home/me/myproject" && "/usr/bin/cargo" "--version" failed, exit status: 1
stderr:
error: command failed: 'cargo': No such file or directory (os error 2)

It seems that the language server is being launched in such a way that it is outside the FHS environment, so it can't find cargo where it expects it. Inside the FHS, cargo is indeed at /usr/bin/cargo. Previously, this wasn't an issue, so either it is being launched differently, or its expectations are different.

Any pointes greatly appreciated.

OS: NixOS Linux x64 6.6.50
VS Code: 1.93.0 in FHS environment including rustup
rust-analyser extension: 0.3.2137 from marketplace
rust-analyzer: 0.3.2137 from extension
rust toolchain: 1.77 from rustup

Start by reproducing the workspace load in the reported NixOS FHS setup with VS Code 1.93.0 and rust-analyzer 0.3.2137, then trace how the VS Code extension launches the server and invokes cargo. Done means rust-analyzer can find /usr/bin/cargo inside the FHS environment and load the workspace successfully.