Fix local scheme for registered file systems in file picker

Part of #https://github.com/microsoft/vscode/issues/109345

src/vs/workbench/services/dialogs/browser/simpleFileDialog.ts

@@ -212,7 +212,12 @@ export class SimpleFileDialog {
 			path = path.replace(/\\/g, '/');
 		}
 		const uri: URI = this.scheme === Schemas.file ? URI.file(path) : URI.from({ scheme: this.scheme, path });
-		return resources.toLocalResource(uri, uri.scheme === Schemas.file ? undefined : this.remoteAuthority, this.pathService.defaultUriScheme);
+		return resources.toLocalResource(uri,
+			// If the default scheme is file, then we don't care about the remote authority
+			uri.scheme === Schemas.file ? undefined : this.remoteAuthority,
+			// If there is a remote authority, then we should use the system's default URI as the local scheme.
+			// If there is *no* remote authority, then we should use the default scheme for this dialog as that is already local.
+			this.remoteAuthority ? this.pathService.defaultUriScheme : uri.scheme);
 	}
 
 	private getScheme(available: readonly string[] | undefined, defaultUri: URI | undefined): string {