This is similar to e.g. Files which as a separate menuitem "Open in " for faster opening in the common case.
I would be 👎 on moving it to the submenu - it just adds another click and hunting through a submenu for little gain.

@jeremypw There's not really a reason why this "Open in" item is special and different from other "Open in" actions like new tab, new window, etc. If you need the fastest opening there is a keyboard shortcut :) But not having items organized with other like items is what leads to menu hunting.

The toplevel item in files is for the default activate/launch case since that's sometimes non-obvious. In code the default activate case for a folder is to expand/collapse it

I use that option all the time and it was irritating to have to open the submenu to get to "Open in Terminal" option. True, you have the shortcut but I still regard this internal action more important than and distinct from opening in an external app. I don't understand the comment about "default active case" - expand/collapse isn't a menu option at all. For me "Open in Terminal Pane" is probably the most used option, at least for project folders.

The option could be moved to the bottom of the menu I suppose, but it wouldn't be my preference.