Steps to Reproduce:
Does this issue occur when all extensions are disabled?: Yes
It works for me on Arch Linux,
VSCode version:
1.49.3
2af051012b66169dde0c4dfae3f5ef48f787ff69
x64
OS Version: Arch Linux with Gnome
Shell: zsh
Works with all extensions
It works for me on Arch Linux,
VSCode version:
1.49.3
2af0510
x64
OS Version: Arch Linux with Gnome
Shell: zshWorks with all extensions
Good for you!!
This bug is annoying me.
I had to switch to PHPStorm, there is no such bug in there.
It's not works for me
VSCode version: 1.49.3
OS Version: Fedora 33 with Gnome
Shell: Bash
It's not works for me
VSCode version: 1.49.3
OS Version: Fedora 33
Shell: Bash
For me, it's happening the same bug as described by @ferox
None of the special characters áéíóúäëïöüâêîôû and all the others like this are accepted on the build-in terminal and the integrated one.
RPM for the VScode downloaded form the oficial website (//code.visualstudio.com/Download)
Version: 1.49.3
Commit: 2af051012b66169dde0c4dfae3f5ef48f787ff69
Date: 2020-10-02T17:56:11.027Z
Electron: 9.2.1
Chrome: 83.0.4103.122
Node.js: 12.14.1
V8: 8.3.110.13-electron.0
OS: Linux x64 5.8.13-200.fc32.x86_64
FEDORA 32 workstation
This is definitely a VS Code bug. Everything is working as expected with Yakuake and PHPStorm 2020.2 terminal.

I'm using Fedora 33 KDE Spin. If I type characters that have a key of its own it works fine, but if I use a modifier it doesn't. It either shows an unmodified character or something else completely. I have two layouts, German QWERTZ and Spanish Spain.
It works for me on Fedora 31.
VSCode Version: 1.49.2

I'm digging it to find the bug.
So I just installed Atom with the x-terminal plugin (https://github.com/bus-stop/x-terminal). X-Terminal is a fork of atom-xterm. So this annoying bug also occurs in Atom Text Editor.
Atom version: 1.51.0
Electron version: 5.0.13
Node version: v12.0.0
X-Terminal version: 10.0.1

For me, it's happening the same bug as described by @ferox
None of the special characters áéíóúäëïöüâêîôû and all the others like this are accepted on the build-in terminal and the integrated one.
RPM for the VScode downloaded form the oficial website (//code.visualstudio.com/Download)
Version: 1.49.3
Commit: 2af051012b66169dde0c4dfae3f5ef48f787ff69
Date: 2020-10-02T17:56:11.027Z
Electron: 9.2.1
Chrome: 83.0.4103.122
Node.js: 12.14.1
V8: 8.3.110.13-electron.0
OS: Linux x64 5.4.0-48-generic
Linux Mint 20 Cinnamon
It works for me on Fedora 31.
VSCode Version: 1.49.2

After some tests and research on a few VMs an baremetal too, we have this results (all with the most up-to-date versions)
VScode on F33KDE or F33workstation => bug
VScode on F31KDE => bug
VScode on F32workstation => bug
VScode on F31cinnamon or F33cinnamon => NO BUG!!!!!
We found that using electerm (a project that uses xterm too) the problem mimics the results above.
I can confirm that the bug also occurs in Codium
Codium Version: 1.49.1
OS Version: Fedora 32 with Cinnamon
Shell: bash
commit: 58bb7b2331731bf72587010e943852e13e6fd3cf
Steps to Reproduce:
Step into Terminal -> New Terminal -> select a project
Start typing those special characters: á, à, ã, ä, etc.

It works for me on Fedora 31.
VSCode Version: 1.49.2
Cinnamon right???
yes
It seems that on F32 Cinnamon the bug shows too on my setup, on VScode and on Electerm.
I'm digging it to find the bug.
So I just installed Atom with the x-terminal plugin (https://github.com/bus-stop/x-terminal). X-Terminal is a fork of atom-xterm. So this annoying bug also occurs in Atom Text Editor.Atom version: 1.51.0
Electron version: 5.0.13
Node version: v12.0.0
X-Terminal version: 10.0.1
hmm, does that mean that it's an Electron issue?
I'm digging it to find the bug.
So I just installed Atom with the x-terminal plugin (https://github.com/bus-stop/x-terminal). X-Terminal is a fork of atom-xterm. So this annoying bug also occurs in Atom Text Editor.
Atom version: 1.51.0
Electron version: 5.0.13
Node version: v12.0.0
X-Terminal version: 10.0.1
hmm, does that mean that it's an Electron issue?
No, maybe in the xterm.js
It´s working on Windows

related to this
I still have the same problem on Linux (Fedora 33 KDE).
I still have the same problem on Linux (Fedora 33 KDE).
Yeah, same here!!!!
Version: 1.50.1
Commit: d2e414d9e4239a252d1ab117bd7067f125afd80a
Date: 2020-10-15T11:13:06.921Z
Electron: 9.2.1
Chrome: 83.0.4103.122
Node.js: 12.14.1
V8: 8.3.110.13-electron.0
OS: Linux x64 5.8.18-300.fc33.x86_64
Most helpful comment
It works for me on Fedora 31.
VSCode Version: 1.49.2