To setup a gitea issue tracked project you need to first select the issues tab at the activitiy bar. After that open the command palette in order to type in the command `Initialize Gitea-Issue Tracker` and enter your crendentials:
In order to get nice looking issue icons in multiple colors (of your choice) you just need to assign a label to your issue. The color is being fetched automatically. If you change the color of the label however, you need to delete the `.gitea/{issuename}.svg` file in the given folder. If you skip this step, the file is not going to get updated. In most cases you need to restart visual studio code to apply the icons in the issues tab.