Some people point at LLMs confabulating, as if this wasn’t something humans are already widely known for doing.

I consider it highly plausible that confabulation is inherent to scaling intelligence. In order to run computation on data that due to dimensionality is computationally infeasible, you will most likely need to create a lower dimensional representation and do the computation on that. Collapsing the dimensionality is going to be lossy, which means it will have gaps between what it thinks is the reality and what is.