The April 2025 release of the Python and Jupyter extensions for Visual Studio Code is now available. This update introduces enhancements to the Copilot experience in Notebooks, improved support for editable installs, faster and more reliable diagnostics, and the addition of custom Node.js arguments with Pylance, and more!
Multi-root workspaces will let you choose the interpreter for each directory;
I think that’s the best way to make it work if you want to have more than one project in the same VS Code instance.