"Unable to read file" when using vscode in a sub-crate of a workspace

mkdir workspace
cd workspace
echo '[workspace]' > Cargo.toml && echo 'members = ["foo"]' >> Cargo.toml
cargo new foo
echo "syntax error" > foo/src/main.rs
code foo

Once vscode loads up, you may need to enable cargo watch if it's not automatically enabled on startup. You'll see the error count says 1 on the bottom of the screen:

Click on it to bring up the "problems" tab, if it isn't already up already. You'll see one error message:

Click on the message. Instead of navigating to src/foo.rs, you will get this error:

Notice how the file name has foo/foo in it. I think this is because cargo check, which is run by cargo watch, knows that we are inside a Cargo workspace, and uses the path of the file relative to the workspace root in the error message:

error: expected one of `!` or `::`, found `error`
 --> foo/src/main.rs:1:8
  |
1 | syntax error
  |        ^^^^^ expected one of `!` or `::` here

error: aborting due to previous error

error: could not compile `foo`.

meanwhile, rust-analyzer doesn't know about the Cargo workspace, and looks for the file foo/src/main.rs relative to the VS Code workspace root, which is how we get foo/foo in the error message in VS Code.

Run the reproducer from the issue with a Cargo workspace containing the foo sub-crate, cargo watch, and VS Code. Trace how rust-analyzer resolves compiler diagnostic paths when foo is opened as the VS Code root; done means clicking the diagnostic opens foo/src/main.rs instead of duplicating the foo path.