Visual Studio Code - Unable to connect to simulator

Hello,

I followed instructions given here and did following:

• I downloaded Connect IQ SDK, copied the contents of the downloaded zip file to a folder, and ran "sdkmanager.exe". I downloaded Connect IQ 4.1.5 from August 4, 2022, size is 27.0 MB, and this version is set as Current SDK. The tab "Devices" reports "Watches/Wearables (17 New, 90/90 Installed)".
• I installed Visual Studio Code (version 1.71.0) and installed and verified the Monkey C extension.
• I made sure "Java 8 Update 341 (64-bit)" is installed. By the way, should it be 64-bit or 32-bit Java? Instructions do not mention this.
• I specified path to my developer key in Visual Studio Code Monkey C settings.

I then opened a folder with my watchface project I worked with using Eclipse IDE in the past, updated contents of manifest.xml to:

<?xml version="1.0"?>
<!-- This is a generated file. It is highly recommended that you DO NOT edit this file. -->
<iq:manifest xmlns:iq="http://www.garmin.com/xml/connectiq" version="4">
    <iq:application entry="..." id="..." launcherIcon="@Drawables.LauncherIcon" minSdkVersion="3.2.0" name="@Strings.AppName" type="watchface" version="0.0.2">
        <iq:products>
            <iq:product id="fenix6"/>
        </iq:products>
        <iq:permissions>
            <iq:uses-permission id="Positioning"/>
            <iq:uses-permission id="SensorHistory"/>
            <iq:uses-permission id="UserProfile"/>
        </iq:permissions>
        <iq:languages>
            <iq:language>eng</iq:language>
        </iq:languages>
        <iq:barrels/>
    </iq:application>
</iq:manifest>

I successfully built the project, but I have two problems now:

1. No matter if I select "Start Debugging" or "Run Without Debugging", I need to select a debugger from a list. I would not expect this if "Run Without Debugging" is used.
2. There is an error message "Unable to connect to simulator" in the Debug Console. I have no idea what might be causing this.