Apex debugger on VSCode is reading the log you provide. It will stop when the line of the log reaches a breakpoint in VSCode that matches the log.
If it is not stopping, it could be a number of reasons:
Your log is incomplete: Sometimes, with very very long logs, Salesforce logs are incomplete.
Your test is failing before reaching your breakpoints (to debug this, set a breakpoint at the very beginning of your testSetup method and see if it hits the breakpoint, or run the test normally to see in which line it fails)
Complex flows, for example: method -> trigger -> flow -> trigger -> flow (etc.). The debugger sometimes hickups and cannot follow the execution.
Your code is incomplete: You might not have available in your project all the code running in your org. The debugger can get lost as well.
In my experience, the debugger is generally working, but sometimes it just doesn't work. In those cases, I reduce my test to just some lines, try again to see if it works, and then add code to the test in smaller steps.
On a side note, you are using Test.startTest in your @testSetup method. This isn't advisable, and could be messing with your debugger as well.