Template from configured folder… — lists .md files from the folder set in quickpickTemplates.templatesPath (or the extension's templates/ folder). The two fixed templates above do not appear in the list when pointing to the same copy inside the extension (avoids duplication).
The final text replaces {{CODE}} with the selected code and is copied to the clipboard.
Configure templates path
Settings → search for Quickpick Templates: Templates Path
Key: quickpickTemplates.templatesPath
Absolute — uses the specified folder.
Relative — relative to the root of the opened workspace.
Empty — uses the extension's built-in templates/ folder.
The list updates automatically when .md files change in the watched folder; the Reload button forces a refresh.