Edit: Slightly cleaner solution:

Don't make a separate workspace for your code (unless you want it, in which case mostly follow the guide below), and instead of putting a .vscode folder in the parent root folder, open up the workspace launch config from the Run and Debug menu on the left. Make it look something like this:

{
    "folders": [
        {
            "path": "%path to parent%/parent"
        }
    ],
    "settings": {},
    "launch": {
    "version": "0.2.0",
        "configurations": [
            {
                "name": "Launch Python parent",
                "type": "python",
                "request": "launch",
                "program": "${file}",
                "console": "integratedTerminal",
                "cwd": "${workspaceFolder}\\extensions\\mycode", // <-- Important
                "env": {"PYTHONPATH": "${workspaceFolder}; ${workspaceFolder}\\extensions\\mycode; ${env:PYTHONPATH}"} // <-- Important
            }
        ]
    }
}

Not much cleaner, but you don't have to modify the parent project or set up multiple workspaces.

Not so much a question, but a solution to the very specific problem I had. Might be a duplicate of