...the offending condition in the code to trigger the diagnostic never got updated to account for node16.

I kind of figured this is what happened. 😄

That being said, this condition:

if (moduleKind !== ModuleKind.ESNext && moduleKind !== ModuleKind.NodeNext && moduleKind !== ModuleKind.Node16)

It seems backwards. It feels like this should instead be a set of cases where the error is meant to be issued rather than the cases where it's not; it's safe to assume the feature will be supported by any new targets going forwards. In other words it'd be nice to future-proof the check to prevent this bug from happening again in the future.

@typescript-bot cherry-pick this to release-4.8

Heya @andrewbranch, I've started to run the task to cherry-pick this into release-4.8 on this PR at 3d0e834. You can monitor the build here.

Hey @andrewbranch, I've opened #50742 for you.