I think there are generally a variety of ways things can "appear". However it's never the same as true AR. For example, with true AR, you could be fooled into seeing something that's not there. But I can't fool myself (deliberately) with my own mental images.
Having said that, it subjectively feels like the stimulus originates in a different part of the brain at a low level, but eventually both "mental visual" and "true visual" stimulus are unified to some degree.
Like yes, I can visualize a ball in my hand, but it'll always be in a different layer from my actual visual input of my hand. Like two different layers in Photoshop.
Also, beyond the AR concept, one of my favored types of visualizations is what I call "playing myself a movie". It's pretty much what you would imagine, basically watching a movie with my mind's eye. I can watch the movie and look at "real things" at the same time. Works great for falling asleep as well.
I agree, it's a super fascinating discussion.