This odd behavior was first noticed in a test:

It turns out that the URIs and paths we're receiving "over the wire" (in the raw LSP requests themselves) are mostly cased correctly, with the exception of driver letters being lower case. Because of this, when PowerShell/PowerShell#20057 was temporarily fixed by making PowerShell's debugger's _pendingBreakpoints collection case-sensitive, it broke the extension's debugger PowerShell/vscode-powershell#4668.

We need to figure out why those drive letters are coming over lower-case, as the rest of the Windows ecosystem doesn't expect drive letters to be lowercase. Worst case scenario is that we fix the casing as we handle the request, but I'd like to see where the issue originates (thinking perhaps in the LSP client library...) and try to fix it there. Though technically c:/ is valid, and it's mostly PowerShell that's caring about it not being C:/.