As the title suggests, before this PR if you had something like:

my-package/
--> package.json
--> src.abc/main.ts

The process of determining package type by ascending the parent directory chain would break, because eventually !!extname("src.abc") would be true and we'd run fileURLToPath on a non-URL because the first call with main.ts would have isFilePath true, and hence would have stripped the file:///.

We could add it back, but as called out in the comment, checking extname is not a perfect solution. Instead, we allow passing in whether or not the given path is a file path or not, because as we ascend we know with certainty that we have directories. It's just the first call where we're uncertain, and will do a slightly more expensive readdir check. This should also be able to handle scenarios where you import a directory with an index.ts, for example.

There was also a secondary problem we had here: if we found a package.json file while ascending, but it had no type value, we'd keep ascending. This is actually wrong, as per the node docs that state:

The nearest parent package.json is defined as the first package.json found when searching in the current folder, that folder's parent, and so on up until a node_modules folder or the volume root is reached.

If the nearest parent package.json lacks a "type" field, or contains "type": "commonjs", .js files are treated as CommonJS.