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Solved. I was just using the wrong path when selecting my interpreter manually.
I right clicked on the appropriate Python3.10 interpreter file and copied the Path url. then pasted it right into the command palette to manually set the interpreter. that refreshed vscode and removed the warning.
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I know this is somehow old and solved, but just for the record: sometimes just refreshing VS Code will do the job, in fact it may be just a misunderstanding by VS Code itself. After pressing Ctrl + Shift + P
:
>Reload Window
Source:stackexchange.com