Opening Codespace / devcontainer from VS Code fails

How to reproduce:

open this project locally from Visual Studio Code
click the "Reopen in Container" button when prompted
"Starting dev container" begins to run, and after a minute
"An error occurred setting up the container"

The relevant part of the startup log is this:

#0 4.338 Reading state information...
#0 4.390 E: Unable to locate package moby-cli
#0 4.390 E: Unable to locate package moby-engine
------
Dockerfile:9
--------------------
   7 |     # Install Docker-in-Docker support
   8 |     COPY .devcontainer/library-scripts/*.sh /tmp/library-scripts/
   9 | >>> RUN apt-get update && /bin/bash /tmp/library-scripts/docker-in-docker-debian.sh
  10 |     ENTRYPOINT ["/usr/local/share/docker-init.sh"]
  11 |     VOLUME ["/var/lib/docker"]
--------------------
ERROR: failed to solve: process "/bin/sh -c apt-get update && /bin/bash /tmp/library-scripts/docker-in-docker-debian.sh" did not complete successfully: exit code: 100
[21130 ms] Error: Command failed: docker buildx build --load --build-arg BUILDKIT_INLINE_CACHE=1 -f /Users/matt/projects/azure-capi-cli-extension/.devcontainer/Dockerfile -t vsc-azure-capi-cli-extension-31a0d5302d86df875d962bc2350d49b6 --build-arg VARIANT=3.6 --build-arg INSTALL_NODE=false --build-arg NODE_VERSION=lts/* /Users/matt/projects/azure-capi-cli-extension
[21131 ms]     at OF (/Users/matt/.vscode/extensions/ms-vscode-remote.remote-containers-0.251.0/dist/spec-node/devContainersSpecCLI.js:258:1490)
[21131 ms]     at process.processTicksAndRejections (node:internal/process/task_queues:96:5)
[21131 ms]     at async Wf (/Users/matt/.vscode/extensions/ms-vscode-remote.remote-containers-0.251.0/dist/spec-node/devContainersSpecCLI.js:257:2801)
[21131 ms]     at async pb (/Users/matt/.vscode/extensions/ms-vscode-remote.remote-containers-0.251.0/dist/spec-node/devContainersSpecCLI.js:257:1779)
[21131 ms]     at async DF (/Users/matt/.vscode/extensions/ms-vscode-remote.remote-containers-0.251.0/dist/spec-node/devContainersSpecCLI.js:263:2006)
[21131 ms]     at async to (/Users/matt/.vscode/extensions/ms-vscode-remote.remote-containers-0.251.0/dist/spec-node/devContainersSpecCLI.js:263:3110)
[21132 ms]     at async Ak (/Users/matt/.vscode/extensions/ms-vscode-remote.remote-containers-0.251.0/dist/spec-node/devContainersSpecCLI.js:383:8108)
[21132 ms]     at async Ok (/Users/matt/.vscode/extensions/ms-vscode-remote.remote-containers-0.251.0/dist/spec-node/devContainersSpecCLI.js:383:7864)
[21136 ms] Exit code 1
[21140 ms] Command failed: /Applications/Visual Studio Code.app/Contents/Frameworks/Code Helper.app/Contents/MacOS/Code Helper --ms-enable-electron-run-as-node /Users/matt/.vscode/extensions/ms-vscode-remote.remote-containers-0.251.0/dist/spec-node/devContainersSpecCLI.js up --user-data-folder /Users/matt/Library/Application Support/Code/User/globalStorage/ms-vscode-remote.remote-containers/data --workspace-folder /Users/matt/projects/azure-capi-cli-extension --workspace-mount-consistency cached --id-label devcontainer.local_folder=/Users/matt/projects/azure-capi-cli-extension --log-level debug --log-format json --config /Users/matt/projects/azure-capi-cli-extension/.devcontainer/devcontainer.json --default-user-env-probe loginInteractiveShell --mount type=volume,source=vscode,target=/vscode,external=true --skip-post-create --update-remote-user-uid-default on --mount-workspace-git-root true
[21140 ms] Exit code 1

Azure / azure-capi-cli-extension

Opening Codespace / devcontainer from VS Code fails #154