I think we can chalk this to closure. applicationinsights.config (or xml) will come into picture when in Visual Studio we create a project, and VS has the Application Insights SDK installed. This is probably fixed in the latest version, so ensure to have the latest SDK installed. Read more here: https://zcusa.951200.xyz/en-us/azure/azure-monitor/app/configuration-with-applicationinsights-config . We should ignore this file when publishing content to an app service in Azure. When i tried creating a new app in azure and enable application insights on it, it doesn't seem to create such a "applicationinsights.config". The instrumentation settings in the app service configuration is enough to have application insights activated on the app service. IF in case this applicationinsights.config is definitely needed on the app service, then we have to make sure of the below config: (this ensures no additional headers such as x-ms-request-root-id, x-ms-request-id and Request-Id are added to requests going out of the appservice)
<TelemetryModules>
<Add Type="Microsoft.ApplicationInsights.DependencyCollector.DependencyTrackingTelemetryModule, Microsoft.AI.DependencyCollector">
<ExcludeComponentCorrelationHttpHeadersOnDomains>
<Add>core.windows.net</Add>
<Add>core.chinacloudapi.cn</Add>
<Add>core.cloudapi.de</Add>
<Add>core.usgovcloudapi.net</Add>
<Add>localhost</Add>
<Add>127.0.0.1</Add>
</ExcludeComponentCorrelationHttpHeadersOnDomains>
</Add>
</TelemetryModules>