Code incorrectly assumes `wsl.exe` outputs UTF-16LE when the `WSL_UTF8` environment variable is set

[integerbang]

Type: Bug

Visual Studio Code seems to expect wsl.exe to output in UTF-16LE, which typically doesn't cause problems unless WSL_UTF8=1 is set. In which case, wsl.exe outputs UTF-8 instead, causing distribution names to be interpreted incorrectly:

To reproduce:

1. Set up a WSL distribution.
2. Add a new user environment variable named WSL_UTF8 with its value set to 1.
3. Open Code, press Ctrl+Shift+P (Command Palette), and then type and enter Create New Terminal (With Profile) to look at the list of Terminal profiles.

The profiles ending in (WSL) should list the actual names for each distribution. Instead, they are incorrectly displayed as garbled text.

VS Code version: Code 1.105.1 (7d842fb, 2025-10-14T22:33:36.618Z)
OS version: Windows_NT x64 10.0.26200
Modes:

System Info

Item	Value
CPUs	12th Gen Intel(R) Core(TM) i5-1235U (12 x 2496)
GPU Status	2d_canvas: enabled direct_rendering_display_compositor: disabled_off_ok gpu_compositing: enabled multiple_raster_threads: enabled_on opengl: enabled_on rasterization: enabled raw_draw: disabled_off_ok skia_graphite: disabled_off trees_in_viz: disabled_off video_decode: enabled video_encode: enabled vulkan: disabled_off webgl: enabled webgl2: enabled webgpu: enabled webnn: disabled_off
Load (avg)	undefined
Memory (System)	7.69GB (0.54GB free)
Process Argv	--crash-reporter-id 146bd52b-6676-45ec-a263-24c5e71e8f7a
Screen Reader	no
VM	0%

Extensions (7)

Extension	Author (truncated)	Version
remote-wsl	ms-	0.104.3
cmake-tools	ms-	1.21.36
cpptools	ms-	1.28.3
cpptools-extension-pack	ms-	1.3.1
hexeditor	ms-	1.11.1
makefile-tools	ms-	0.12.17
cmake	twx	0.0.17

(1 theme extensions excluded)

A/B Experiments

vsliv368:30146709
vswsl492cf:30256860
binariesv615:30325510
nativeloc1:31344060
dwcopilot:31170013
dwoutputs:31242946
copilot_t_ci:31333650
e5gg6876:31282496
pythonrdcb7:31342333
aj953862:31281341
b6b4d950:31327385
nes-set-on:31340697
testaa123:31335226
6abeh943:31336334
c12345:31413568
0574c672:31404437
cloudbuttont:31379625
todos-1:31405332
v66_all_req:31402695
treatment_gpt5applypatchexclusively:31412086
3efgi100_wstrepl:31403338
trigger-command-fix:31379601
auto_model_enabled:31385282
use-responses-api:31390855
applesignin:31399435
anonusage:31403420
d5i5i512:31405346
ff8f5884:31411053

[youssefnabil2030]

Confirmed on Windows 11 build 26200, VS Code 1.105.1.
Removing WSL_UTF8 or setting it to 0 restores correct WSL profile names.
The encoding mismatch seems to be between child_process.execFileSync using utf16le and wsl.exe outputting UTF-8 when WSL_UTF8=1.