Firstly, we still don't truly have many good explanations for intelligence and consciousness that aren't self referential. Drawing hard conclusions on this subject about generative AI and human intelligence, even in 2023, is being hasty, in my opinion.
Which brings me to a lot of the criticisms made about LLMs. The idea that an ideal AI could or even should be capable of constantly generating original output is just plain weird. Where do people get this idea? How often do you meet a human being who hasn't gotten most of their ideas from somewhere else? Even synthesized ideas are forged by other ideas. Ideas that seem original may appear just that, and we just don't see where the connection lies between it and its predecessors. It's silly to dismiss an AI because it "parrots" things, as if that's not a pretty remarkable achievement. It's also very reductive; anyone who has used ChatGPT and doesn't see that it can pretty reliably munge together different ideas is blind or is lying about their use of ChatGPT.
Expecting perfect accuracy and knowledge is also not a reasonable expectation of an AI. An intelligence localized in spacetime is necessarily going to lack understanding of many things. To look to something like ChatGPT as a source of authoritative answers, and to dismiss it upon finding its answers to be specious, is to expect the AI to be God. Well I'm sorry, but we are nowhere near speaking directly to God.
In regards to "true understanding", for all we know, language processing is the workhorse of what humans consider to be acts of intelligence, and individual humans aren't as intelligent as they believe themselves to be. Our ability to communicate with each other about a variety of topics in real time is not so much a matter about being hyperaware of every given fact that is relevant and weighing them in a Bayesian model; how well we can converse is primarily dictated by how rapidly we can construct language by parsing the input, making connections, and producing output. I know I'm not the only one who can speak on a subject only to realize, after having completed a sentence, that I hardly even thought about what I was saying.