Here's what I have in ~/.config/systemd/user/cros-garcon.service.d/override.conf to make this work:
 
[Service]
Environment="XDG_DATA_DIRS=%h/.local/share:%h/.local/share/flatpak/exports/share:/var/lib/flatpak/exports/share:/usr/local/share:/usr/share"

Launcher behavior is really confusing. It seems like if the launcher item has been added on the host side, then it's very hard to hide it after that. Hidden=true doesn't work it seems. NoDisplay=true seems to work but only if the desktop file has MimeType= set to something. So the only reliable way I've found to disable launcher items is to add NoDisplay=true and set MimeType= to some dummy value. This obviously doesn't work with menu editors such as 'alacarte'.

I also can't make sense of icon loading. Specifying an absolute path works for android studio but not when I do it in a custom desktop file. 

The following revision refers to this bug:
  https://chromium.googlesource.com/chromiumos/containers/cros-container-guest-tools/+/d6749f01714c76522de321f1ef6d08d8f077750f

commit d6749f01714c76522de321f1ef6d08d8f077750f
Author: Jeffrey Kardatzke <jkardatzke@google.com>
Date: Wed May 16 21:39:59 2018

Add env vars for garcon for BROWSER, XDG_DATA_DIRS and PATH

BUG= chromium:839472 
BUG= chromium:839106 
BUG= chromium:843515 
TEST=Verified garcon's env has the right vars in it

Change-Id: I6c7af19bdfbaa493483f4bcf094e78d642706cf7
Reviewed-on: https://chromium-review.googlesource.com/1062792
Tested-by: Jeffrey Kardatzke <jkardatzke@google.com>
Reviewed-by: Jeffrey Kardatzke <jkardatzke@google.com>

[add] https://crrev.com/d6749f01714c76522de321f1ef6d08d8f077750f/cros-garcon/conffiles
[modify] https://crrev.com/d6749f01714c76522de321f1ef6d08d8f077750f/cros-garcon/BUILD
[add] https://crrev.com/d6749f01714c76522de321f1ef6d08d8f077750f/cros-garcon/cros-garcon-override.conf

The following revision refers to this bug:
  https://chromium.googlesource.com/chromiumos/platform2/+/c0b689e98c50b660ff1cd1d0cc175ecb37e76779

commit c0b689e98c50b660ff1cd1d0cc175ecb37e76779
Author: Jeffrey Kardatzke <jkardatzke@google.com>
Date: Thu May 17 10:24:39 2018

vm_tools: Fixed bug where local desktop files don't override system

BUG= chromium:843515 
TEST=Verified a local desktop file overrides system

Change-Id: Ibd6bfef4cd1ed5dbe2398488d386834fc29a0361
Reviewed-on: https://chromium-review.googlesource.com/1062928
Commit-Ready: Jeffrey Kardatzke <jkardatzke@google.com>
Tested-by: Jeffrey Kardatzke <jkardatzke@google.com>
Reviewed-by: David Reveman <reveman@chromium.org>
Reviewed-by: Stephen Barber <smbarber@chromium.org>

[modify] https://crrev.com/c0b689e98c50b660ff1cd1d0cc175ecb37e76779/vm_tools/garcon/host_notifier.cc