"Confabulation" is the correct and precise term that comports with the English language, rather than being jargon requiring a neologism.
And why would that be? "Hallucination" means "erratic wandering", implying one is lost - similarly to "delirium" (maetaphor using the plough) and "error". Part of the idea is that of "instead of witnessing the correct, reporting the false" - a very ancient, traditional idea, and akin to the concept of "intelligence" (intus-legere).
"Confabulation" means locutor and interlocutor are talking, exchanging narrations.
but I am not sure - provisionally - that it can be a good idea to relate strictly human neurology to ANNs, if based on phenomena as opposed to structural issues. You do not have that problem when staying with natural language.