Event "@update:" syntax causes TS error in 1.6.2

[mattmink]

When a parent listens to an event on a child using the update:EVENT_NAME syntax, TS errors are reported in VSCode:

• Cannot find name 'PROP_NAME'. ts(2304)
• Unused label. ts(7028)

App.vue

<script setup lang="ts">
import { ref } from 'vue'
import ModalDialog from './components/ModalDialog.vue'

const isModalOpen1 = ref(false)
const isModalOpen2 = ref(false)
</script>

<template>
  <div>
    <div>
      <button @click="isModalOpen1 = true">Show Dialog 1 (<code>close</code> event)</button>
      <ModalDialog :show="isModalOpen1" :large="true" @close="isModalOpen1 = false">
        This dialog uses the <code>close</code> event to close
      </ModalDialog>
    </div>

    <div>
      <button @click="isModalOpen2 = true">Show Dialog 2 (<code>update:show</code> event)</button>
      <!-- errors are on 'show' and 'large' props here -->
      <ModalDialog :show="isModalOpen2" :large="true" @update:show="isModalOpen2 = $event">
        This dialog uses the <code>update:show</code> event to close
      </ModalDialog>
    </div>
  </div>
</template>

ModalDialog.vue

<template>
  <div class="modal" :class="{ 'modal-large': large }" v-show="show">
    <div>
      <slot />
    </div>
    <div>
      <button type="button" @click="$emit('close')">close</button>
      <button type="button" @click="$emit('update:show', false)">update:show</button>
    </div>
  </div>
</template>

<script setup lang="ts">
defineEmits(['close', 'update:show'])

defineProps({
  show: {
    type: Boolean,
    default: false
  },
  large: {
    type: Boolean,
    default: false
  }
})
</script>

Workaround
Revert to version 1.6.1 of Vue Language Features (Volar).

Vue Language Features (Volar) Version: v1.6.2
TypeScript Vue Plugin (Volar) Version: v1.6.2

VS Code Details
Version: 1.77.3 (Universal)
Commit: 704ed70d4fd1c6bd6342c436f1ede30d1cff4710
Date: 2023-04-12T09:19:37.325Z
Electron: 19.1.11
Chromium: 102.0.5005.196
Node.js: 16.14.2
V8: 10.2.154.26-electron.0
OS: Darwin arm64 22.3.0
Sandboxed: Yes

[MajesticPotatoe]

Can confirm same results ts(2304) when using any event with a : in it (@update:model-value being the most common use case)

[johnsoncodehk]

Fixed by 659331c