You can render an .md file with Quarto if the file contains no executable code. Both quarto-cli as well as Rstudio print an error when trying to render an .md that includes calculations (which is the entire idea of Quarto). Perhaps VC code is renaming the .md to .qmd in the background during the rendering because that is the only way I can imagine it would work.
Regarding the discussion here, I feel like opening Quarto (.qmd) files in Obsidian makes very little sense. The syntaxes are different and much of Quarto markdown would be displayed incorrectly.