The fact that it is easy to confuse the server with the client in X, it does not change the fact that the XServer and XEmacs are running on different computers, so each interaction is a round-trip.

XServer and XEmacs are both running on the client machine.

Also it is impossible by laws of physics by using distributed computing, not having each keypress and its display on a rendering surface, being a two way street.

By the "client machine" where XServer and XEmacs are both running, do you mean the machine where the human user is entering keypresses and viewing windows? Or do you mean the machine where the files are ultimately getting edited? Clearly, there has to be something running on each of the machines, since otherwise one side would have nothing to connect to on the other side. What is running on the machine opposite the "client machine"?

The idea with VS Code is that neither the keypresses nor the displayed windows are being sent over the network, but are kept within the same machine where the user is entering or viewing them. Only the file data (or debugger status, etc.), which are cached and far less frequently updated, are sent over the network. Are you saying that XEmacs can also function remotely in this way, with neither keypresses nor displayed windows sent over the network?