I had a similar problem today, I got the error “The container does not meet all the requirements of the VSCode Server”. Apparently, it’s because in version 1.86 they changed the linux requirements for the remote server
Starting with VS Code release 1.86, the minimum requirements for the
build toolchain of the remote server were raised. The prebuilt servers
distributed by VS Code are compatible with Linux distributions based
on glibc 2.28 or later, for example, Debian 10, RHEL 8, Ubuntu 20.04.
My solution was to downgrade VSCode to version 1.85 with the installer in the link below and disable automatic updates :/
https://code.visualstudio.com/updates/v1_85
After that, you might need to uninstall and then install again some of the extensions that have been updated, for them to work with the older VS Code version