On Windows machines, PowerShell Core commonly is the default terminal used by Visual Studio Code.

I think it makes sense to replace the built-in PowerShell Core completely with the Integrated PowerShell terminal provided by the PowerShell add-in when the add-in is installed. In most of the cases it's of no use to have two breeds of the same terminal at the ready.

So, I propose to replace the Boolean option Start Automatically with a DropDown option, to optionally provide a third kind of startup - to start up with VS Code on onStartupFinished, like this:

PowerShell - Start Automatically

Having the proposed onProgramLaunch option selected, the integrated console would then be supposed to replace the default terminal.

A small shim could test the configuration at VS Code start-up and either quit or load/launch the PowerShell extension.