I have a Rails project in which I'm using View Components. Inside most components, I have a erb_template HEREDOC which defines the components markup using ERB templated HTML.
When I set the HEREDOC opening tag to HTML (uppercase only), I get html syntax highlighting. Likewise, if I set it to RUBY, I get ruby syntax highlighting and so on.
I'm struggling to find where I can configure this kind of embedded syntax highlighting and add ERB support. Has anyone done this successfully?

See this github issue which discusses adding more languages to the heredoc: https://github.com/Shopify/vscode-ruby-lsp/issues/820
I believe you can change
grammars/ruby.cson.jsonand submit a PR to vscode-ruby-lsp. The file used to be at https://github.com/atom/language-ruby/ but I believe that repo looks locked/archived.