F5 fails with ENOENT when running JavaScript + AZD templates with package.json under src

[v-ruizh]

OS: Win 11 x64
Build Version: 20260708.1

Repro Steps:

1. Create a JavaScript Functions project from Template Gallery (for example. Timer Trigger (JavaScript + AZD + Bicep)).
2. Observe that package.json is created under the src folder rather than the workspace root.
3. Press F5.

Expect:
The Azure Functions extension should detect the project directory containing package.json and execute npm commands from that location.

Actual:
F5 fails with ENOENT because the extension executes npm install from the workspace root, where no package.json exists.

More Info:
This issue does not reproduce with HTTP Trigger (JavaScript + AZD + Bicep), where package.json is generated in the workspace root.