After installing visual studio, the mimetype is incorrectly defined in the file usr/share/applications/code.desktop.
MimeType=text/plain;inode/directory;application/x-code-workspace;
The above entry will be included. The inode/directory is at fault.
Thus, the desktop icon extension causes unexpected operation.
Clicking on the folder icon loads vscode and not nautilus
It’s not wrong. It can open directories and so can Dolphin, Kate, Gwenview, Filelight, Code - OSS, and Rawtherapee, all of which are registered (in that order) for inode/directory on my KDE system.
Whether GNOME should allow an application to register itself ahead of the default file manager for that type is another question, but I don’t use GNOME so 
. Presumably there is a control panel somewhere that allows you to set the preferred application order .
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