I kept running into this issue as well and it was quite frustrating. I appreciate the ability to customize via an extension, but I really like the drag-and-drop mechanism provided universally (or nearly) that is missing here.
As a result, I ended up disabling the touch bar within VS Code by going to:
Code -> Preferences -> Settings
and then:
Application -> Keyboard
There you will find the checkbox for enabling/disabling the touch bar on macOS. Hope this helps someone else discover it quickly!