While trying to figure out a way to read the right - or any - azd-generated .env file, I found in your commands the azure-dev.commands.getDotEnvFilePath. Trying that in launch.json's inputs, I found it actually worked!

{
  // ...
      "envFile": "${input:azdDotenv}"
    }
  ],
  "inputs": [
    {
      "id": "azdDotenv",
      "type": "command",
      "command": "azure-dev.commands.getDotEnvFilePath"
    }
  ]
}

And before I filed this issue, I see you use it in a lot of templates. I think it would be great to document this use case for any dev using azd whether they start from a template or, more to the point, not. This is incredibly handy for projects using azd.