Summary
The resolution of Xvfb virtual screen was increased from 1024x768 to 1920x1080 in KOGITO-8072. Unfortunately, Xvfb is not smart enough to use the whole screen by itself. Even though the window of VSCode is supposed to be maximized to use the entire 1920x1080 window, it is still placed in a small window in the middle of the screen.
To achieve usage of the entire screen a window manager is needed. According to the discussion on bugzilla.mozilla.org and some others, a Fluxbox is a good choice for its lightweight and compatibility with Xvfb.

When only Xvfb is used, the VSCode is placed in a small window in the middle of the screen with black empty space around, even though the window should be maximized.

When Fluxbox is used within Xvfb, the window is maximized correctly.

AC
Tests are run in 1920x1080 resolution in Xvfb and the window of VSCode is maximized. All the tests are running correctly.