But how do you regulate it? One can setup Disco Diffusion on their own computer, generate some pleasing results that they desire, and go over it on a separate layer, drawing everything "from scratch", then deleting the AI-generated layer.
You don't. Trying to do so would be similar to the crazy lengths schools have gone to to prevent cheating during remote schooling. It's on us to adapt our systems so that they make sense in the new environment.
Tracing over reference images is already widespread in art and has been for centuries. The only difference would be the ability to generate any reference you want. Sounds like a good thing.