Visual Studio Code is an outstanding programming editor – I highly recommend it.
The one thing I strongly dislike is that being an Electron App it is not AppleScriptable in any way, shape, or form – therefore BBEdit is completely safe and secure on my systems for the foreseeable future.
Nevertheless I do use VSC quite a bit for programming now – especially for JavaScript.
No, you can't simply pause Keyboard Maestro.
You have to either either quit the Keyboard Maestro Engine or deactivate the active macro groups in the Keyboard Maestro Editor manually or with AppleScript.
I strongly recommend VS Code - I use it daily, and it's fantastic. It's true it's not scriptable, as Chris said, but you can still automate a lot of stuff using KM.
VSC's keyboard shortcuts are easy to modify, although they're sometimes difficult to find. In case you don't know, in the bottom left corner of VSC is a large "gear" icon, and if you click it, there's a menu item for its keyboard shortcuts.
But like Chris said, if you have a KM shortcut that conflicts, it's pretty easy to disable the shortcut in KM.
I don't know what level of KM knowledge you have, so if this doesn't make sense, let us know, and we'll walk you through it.