VSCode debugging NodeJs project in TypeScript with modules - SyntaxError: Cannot use import statement outside a module

I am having an issue with VSCode to start debugging a NodeJs project in Typescript with modules in a standard test boilerplate project.

I am running in a vicious circle of 2 VSCode errors:

SyntaxError: Cannot use import statement outside a module

and after adding entry to file: package.json

"type": "module",

I get error:

Uncaught TypeError TypeError [ERR_UNKNOWN_FILE_EXTENSION]: Unknown file extension ".ts" for C:\data\projects\project-a01\src\main.ts

In terminal, the app runs fine !
So the issue is with VSCode or I am missing something in my launch.json file.

Here are the steps I am taking to create the project:

OS: Windows 11

Global installs:

    +-- node 19.2.0
    +-- npm 8.19.3
	+-- @jessety/pm2-logrotate@2.7.1
	+-- @nestjs/cli@9.1.8
	+-- @types/node@18.11.18
	+-- @typescript-eslint/eslint-plugin@5.48.0
	+-- @typescript-eslint/parser@5.48.0
	+-- eslint@8.31.0
	+-- node-windows@1.0.0-beta.6
	+-- pm2@5.2.2
	+-- rimraf@3.0.2
	+-- ts-node@10.9.1
	`-- typescript@4.9.4

Project creation commands:

	mkdir C:\data\projects\project-a01
	cd    C:\data\projects\project-a01
	mkdir .vscode
	mkdir src
	mkdir src\functions
	npm init -y
	npm install typescript --save-dev
	npm install ts-node --save-dev
	npm install @types/node --save-dev
	npx tsc --init --outDir dist
	npm init @eslint/config

This quickly, beautifully creates a NodeJs, TypeScript project with the following - slightly edited:

package.json:

{
  "name": "project-a01",
  "version": "1.0.0",
  "description": "",
  "main": "index.js",
  "scripts": {
    "build": "npx rimraf dist && tsc",
    "start": "npm run build && node dist/main.js",
    "test": "echo \"Error: no test specified\" && exit 1"
  },
  "keywords": [],
  "author": "",
  "license": "ISC",
  "devDependencies": {
    "@types/node": "^18.11.18",
    "@typescript-eslint/eslint-plugin": "^5.48.0",
    "@typescript-eslint/parser": "^5.48.0",
    "eslint": "^8.31.0",
    "ts-node": "^10.9.1",
    "typescript": "^4.9.4"
  }
}

tsconfig.json

	{
	  "compilerOptions": {
		"target": "es2016",
		"module": "commonjs",
		"outDir": "dist",
		"esModuleInterop": true,
		"forceConsistentCasingInFileNames": true,
		"strict": true,
		"skipLibCheck": true
	  }
	}

src/main.ts

import { test } from "./functions/test.function";

function launchApp() {
  console.log('Hello');
  test();
}
launchApp();

src\functions\test.function.ts

export function test() {
  console.log('Hello2');
}

Commands to compile and run:

tsc
node dist/main.js

and we get:

Hello
Hello2

All works fine !

NOW to VSCode - file: .vscode\launch.json

{
  "version": "0.2.0",
  "configurations": [
    {
      "name": "VSC-debug",
      "type": "node",
      "request": "launch",
      "skipFiles": [
        "<node_internals>/**"
      ],
      "program": "${workspaceFolder}/src/main.ts",
      "outFiles": [
        "${workspaceFolder}/dist/**/*.js"
      ],
      "sourceMaps": true
    }
  ]
}

. . . and when trying to launch in VSCode one of the 2 errors pops up - depending on the condition of adding/removing "type": "module" from package.json as described at the beginning.

The question is: How to fix these errors and get VSCode to run this basic project in debug mode and allow debugging with code breaks ?

So after more research, here are the steps that made VSCode start working on the TypeScript project.

tsconfig.json - add:

"rootDir": "./src",
"moduleResolution": "node",
"sourceMap": true, 

.vscode\launch.json

{
  "version": "0.2.0",
  "configurations": [
    {
      "name": "VSC-debug",
      "type": "node",
      "request": "launch",
      "program": "${workspaceFolder}\\src\\main.ts",
      "preLaunchTask": "npm: build",
      "sourceMaps": true,
      "smartStep": true,
      "internalConsoleOptions": "openOnSessionStart",
      "outFiles": [
          "${workspaceFolder}/dist/**/*.js"
      ]
    }
  ]
}

For those interested, the steps in the above question and the adjustment in this answer will give us a nice and simple:
NodeJs - TypeScript project boilerplate / template - workable in VSCode.