2 answers
Hi,
The command "SFDX: Create Lightning Web Component" only works when you’ve opened a Salesforce project. Make sure you initially create your project with "SFDX: Create Project" or "SFDX: Create Project with Manifest" and open that actual project folder in VS Code.
Ensure that all extensions in Salesforce Extension Pack are installed and enabled. Update both the Salesforce CLI and VS Code Salesforce extensions to the latest versions. Ensure that VS Code is opened in a trusted (non-restricted) mode.