2. and 3. sound like sensible options. Though none of the options is inherently wrong. But the first one doesn’t sound easily reproduceable.

For 2: see the other comment https://feddit.org/post/25212909/11301373

For 3: i think you can also create a “host” terminal in vscode? (Maybe i’m remembering wrong). Then you can simply cd to your project and use git etc as usual