There is a different setting for disabling all AI features apart from "Hide Copilot". As per the official documentation:

You can disable the built-in AI features in VS Code with the [chat.disableAIFeatures setting](vscode://settings/chat.disableAIFeatures) [The link opens the VS Code setting directly.], similar to how you configure other features in VS Code. This disables and hides features like chat or inline suggestions in VS Code and disables the Copilot extensions. You can configure the setting at the workspace or user level.

[...]

If you have previously disabled the built-in AI features, your choice is respected upon updating to a new version of VS Code

"Hide copilot" and the disable-all-AI-features-setting are different settings in different places. This already caused confusion. The decision to make this all opt-out and seem to be deliberate and final as per this Github issue.