Couldn't find a solution so opened opened a new issue:
trying to ssh to Pi 3b+ from Powershell in windows vs code using key authentication.
Works as expected if the public key file is in user/ .ssh and not registered with the agent using with ssh-add. If the key is registered the error: warning: agent returned different signature type ssh-rsa (expected rsa-sha2-512) is generated and the remote system logon password is requested. Removing the key from the agent (ssh-add -d) and putting the .pub file in .ssh enables it to work as expected. Same error is encountered from a powershell window opened as administrator.

Client : Windows 10pro 10.0.18363
Key generated with 10.0.18363 ssh-keygen
Server : Raspberry Pi running Raspbian Buster with desktop
system updated with latest software versions