Implementing Cursor AI editor-style inline suggestions with hover controls in VS Code extensions

[saileshkalakoti]

Hi,
I'm trying to create a VS Code extension that shows inline code suggestions similar to Cursor AI's (or Github Copilot) implementation. Specifically, I need to show the original code with a red background and the suggested alternative below it with a green background, without adding extra lines to the document. When hovering over these lines, accept/reject controls (✓ ?) should appear.
Also, the suggestion should be in a virtual line, and line count of the file should not increase, while we are seeing the suggestion.

Tried few things like createTextEditorDecorationType or codelens. But wasn't able to achieve the same.

Is it even possible for a vs code extension to do that?