Thanks for this very deep investigation and the explanations!

What I don't understand at a first glance though, is why there is a race condition in the first place.
This code runs in sync, so I don't understand how timing can influence the behavior.

Actually, I don't think it is a race condition. Here is the stack from the repro:

freeInlineCompletions (VM264:158) - Deletes the inline completion
removeRef (provideInlineCompletions.ts:180)
dispose (provideInlineCompletions.ts:157)
dispose (inlineCompletionsSource.ts:231)
_setValue (base.ts:453)
set (base.ts:416)
clearSuggestWidgetInlineCompletions (inlineCompletionsSource.ts:116)
(anonymous) (inlineCompletionsModel.ts:123)
transaction (base.ts:228)
(anonymous) (inlineCompletionsModel.ts:118)
_recomputeIfNeeded (derived.ts:195)
get (derived.ts:172)
reportChanges (base.ts:153)
endUpdate (utils.ts:270)
endUpdate (derived.ts:252)
finish (base.ts:266)
transaction (base.ts:230)
update (suggestWidgetInlineCompletionProvider.ts:143)
(anonymous) (suggestWidgetInlineCompletionProvider.ts:105)
_deliver (event.ts:1121)
_deliverQueue (event.ts:1132)
fire (event.ts:1156)
hideWidget (suggestWidget.ts:748) - Suggest Widget hides
(anonymous) (suggestController.ts:272)
_deliver (event.ts:1121)
_deliverQueue (event.ts:1132)
fire (event.ts:1156)
cancel (suggestModel.ts:317)
_onNewContext (suggestModel.ts:738)
_refilterCompletionItems (suggestModel.ts:441)
(anonymous) (suggestModel.ts:202)
_deliver (event.ts:1121)
_deliverQueue (event.ts:1132)
fire (event.ts:1156)
(anonymous) (codeEditorWidget.ts:1656)
_deliver (event.ts:1121)
fire (event.ts:1152)
_emitOutgoingEvents (viewModelEventDispatcher.ts:64)
endEmitViewEvents (viewModelEventDispatcher.ts:109)
_withViewEventsCollector (viewModelImpl.ts:1092)
_executeCursorEdit (viewModelImpl.ts:1029)
executeEdits (viewModelImpl.ts:1032)
executeEdits (codeEditorWidget.ts:1215) - Edits are applied
(anonymous) (inlineCompletionsModel.ts:409)
(anonymous) (nls.ts:4)
__awaiter (nls.ts:4)
_acceptNext (inlineCompletionsModel.ts:376)
(anonymous) (inlineCompletionsModel.ts:338)
(anonymous) (nls.ts:4)
__awaiter (nls.ts:4)
acceptNextWord (inlineCompletionsModel.ts:337) - acceptNextWord
(anonymous) (commands.ts:102)
(anonymous) (nls.ts:4)
__awaiter (nls.ts:4)
run (commands.ts:100)
runEditorCommand (editorExtensions.ts:386)
(anonymous) (editorExtensions.ts:320)
(anonymous) (editorExtensions.ts:315)
invokeFunction (instantiationService.ts:68)
invokeWithinContext (codeEditorWidget.ts:434)
runEditorCommand (editorExtensions.ts:308)
runCommand (editorExtensions.ts:320)
handler (editorExtensions.ts:154)
invokeFunction (instantiationService.ts:68)
executeCommand (standaloneServices.ts:285)
_doDispatch (abstractKeybindingService.ts:327)
_dispatch (abstractKeybindingService.ts:184)
(anonymous) (standaloneServices.ts:327)