There's a nice Container Apps extension available for VS Code. Currently, it's in preview and the behaviour I'm about to describe is with version v0.2.0.
If you want to refer to an image from an organization/namespace in Docker Hub, let's say you want the bitnami/nginx image, you need to enter the organization/namespace at step 3 of the new Container App wizard, replacing library with bitnami.
Next, you pick the image from the dropdown list. Perfect!
The issue is when you want to refer an image that is at the top level, without an organization/namespace. If you select Docker Hub as the registry and try to enter ngnix:alpine, you'll get this error:
What you need to do is instead of selecting Docker Hub Registry, you select Other public registry.
Then you need to enter docker.io/nginx:alpine
And this will work 😀