Integrated terminal: Inserting X selections requires precise mouse positioning

Does this issue occur when all extensions are disabled?: Yes

• VS Code Version: 1.70.0
• OS Version: Debian 11.4, Gnome Shell 3.38.6, X11 7.7+22

I've noticed this being an issue for few months now.

Steps to Reproduce:

1. Open the embedded terminal (Ctrl+`)
2. Select a word (either in the terminal, in the editor window, or another window), to copy the selection into the primary X selection buffer. Do not hit (Shift+)Ctrl+C
3. Ensure the selection is copied, by clicking with the middle mouse into an editor. This should paste the previous selection.
4. Try the same in the terminal window:
   • if you click on an area free of text, the selection is inserted
   • if you click on an area with text in it, the selection does not appear (this is the bug)

https://user-images.githubusercontent.com/327411/183039470-9d834491-8748-453c-b2fb-a3585556374e.mp4

Workarounds:

1. Use the clipboard. This is annoying, because for me, selecting text with the mouse, moving the mouse a few 100 pixel down and clicking the middle mouse button (or the scroll wheel in my case) is much faster than Ctrl+C, Ctrl+`, Ctrl+Shift+V.
2. Click on an area without text. This is annoying, because I need to be precise with the mouse positioning. If the terminal is full of program output, I need to hit the last line (containing the prompt).

See also:

• X Selections, Cut Buffers, and Kill Rings