The whole point here is that VSCode is just an editor. Nothing more. It won't "run" your site, and it doesn't care where on your system PHP is installed beyond being able to provide hints and definitions as you code. And unless you've installed an SQL plugin, VSCode doesn't care a thing about your database.
As to the 'Add Image' function, I'm not really sure what that refers to. However, the
!(https://) is pretty standard Markdown, which has been around since about 2004. In fact, this board uses it. Click the link button in the editor and you'll see almost exactly what you posted (the exclamation mark lets the interpreter know you mean an image, not a hyperlink).
If your site is working on the same machine you're developing on, then it sounds like the confusion has to do with what you expect VSCode to do. If it's working on a different machine, then you need to heed Weedpacket's advice and check the setup on your local machine - something is different between the two systems.
It sounds like you've gotten used to doing things a specific way, which is very understandable. In the meantime, the world has moved on and you're just now getting shoved into it. I've been at this for ~25 years so I get it but I can tell you it's much better now then it was back then.