Is the extension system in VSCode not powerful enough to make these just normal extensions for a vanilla VSCode executable? Or is everyone just going for lock in, since if you download MyFork, you can't start using some other extension that uses OtherGuysModel?

Back when Cursor was new (before literally everything was AI hype) they explicitly called out that they wanted to do more in-depth integration with the editor than was possible with just the extension APIs.

Presumably that hasn't changed much. If you want to do any large-scale edits of the UI you need to spin up a fork.

Correct. One could say the same thing for browsers. I suppose on the one hand it's good that it's relatively easy to spin up a new project like this, on the other hand one must swear allegiance to their large software company of choice.