Instant interaction response and common interfaces across different development tasks help my productivity immensely. Having started a new job in P...
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Why not run a headless Linux, SSH in to do any config or CLI stuff, and use remote FS (usually managed with SFTP or SCP) from your favorite editor to edit code locally?
Back in the PHP 5.3 days, I used the remote FS functionality in KomodoEdit and a terminal program at work. It's possible to get that in something as lightweight as VS Code now. I think there's even a plugin for it available for Notepad++.
For my personal projects, I ran a WAMP setup, ensuring the version #s of my PHP, MySQL, and Apache matched my production LAMP server.
It works, if you have reliable Internet connection and a VPN setup to go with it at all times you want or need to do work. Many tasks are easier and faster over more or less virtual LAN, such as fuzzing, stress testing and direct DB interactions on big amounts of data. If the dev server is reachable through a local virtual network interface I can work with it while on long commutes and when ISP:s fail me.
As for VS Code being lightweight, it's more efficient to run a VM with vim, mycli, Chrome with a few pages open and the web serving stuff. It rarely consumes more than 5 GB of RAM, while VS Code happily chews up the double on its own with a few plugins and the same amount of open files. While I use Notepad++ for certain tasks it is a fairly crude coding environment.
As someone who's been working with PHP on Windows for 10 years I have absolutely no idea what you're talking about.
I usually just install Homestead on Hyper-V and start coding with my favorite editor (which is PHPStorm, but it could very well be VSCode or Atom), test locally and push to gitlab to deploy via CI/CD.
For the command line I mostly use the default Powershell terminal (which is underwhelming), but Conemu or the preconfigured cmder are IMHO better alternatives than MobaXterm. Hopefully in a couple of months we'll have the native windows Terminal.
I can't help you with the caps-lock and Ctrl situation as I have a typematrix keyboard where the caps-lock key is conveniently tucked at the very right side of the keyboard where I can forget about it ;-)