Turbo Monorepo: How to fix incorrect "Cannot find module" errors in vscode?

Question

Summary: Correct module imports get red highlighting and specific incorrect module imports don't get red highlighting.

Steps to reproduce (performed on this fork of kitchensink: https://github.com/jensenrrr/turbo-vscode-import-issue):

1. Clone https://github.com/hasanaktas/turborepo-kitchensink.
2. Add folder 'bird' to 'packages/logger/src'.
3. Add file 'feels.ts' to the bird folder with the content "export const feels = () => 2;" inside of it. (File location 'packages/logger/src/feels
4. Import feels at the top of server.ts: import { feels } from 'logger/bird/feels'. Note the red highlighting on the import.
5. Run pnpm i && turbo dev/build.
6. Note that the project builds and runs with the import despite the red highlighting.
7. Update the import from step 4 to: import { feels } from 'logger/src/bird/feels'. Note the red highlighting goes away.
8. Run pnpm i && turbo dev/build.
9. Note that the project fails to build/run.

This issue (https://github.com/vercel/turbo/issues/4771) looks like a similar problem, but I don't think it's quite the same because Running "Typescript: Restart TS Server" doesn't fix the problem and it looks like my VSCode TS Server} thinks I'm directly accessing the logger folder instead of the output of the logger build.

Inside the node_modules folder, instead of the output of the dist folder, I have all of the folders and files from package (src and dist folders and their contents).