> Is ingestion of copyrighted material as part of the model training process an infringement itself? I say no - it is equivalent to a human going to a library and reading all the books there.
It might be Fair Use for other reasons, but any argument that uses an “it’s like a human doing X” analogy is, legally, misguided. The courts simply do not see machines as being legally analogous to human brains. Humans can “copy" content into their brains through their senses and its not only not a copyright violation, its not legally a copy for which you need to do anything like fair use analysis, copy it, even lossily, into a machine where it is non-transiently stored, then it is, legally, a copy, and a violation unless an exception like Fair Use applies.
> Is the output of copyrighted material from a model infringement? Yes, obviously.
Again, only if it is actually a copy and not coincidence, and only if exceptions like Fair Use don't apply. It may be that training is more likely to be Fair Use than inference is—I’ve seen good arguments that don’t rely on treating machines as analogs of humans for that—but if you are copying copyright protected material, lossily or not, with a machine, it's going to be infringement unless an exception to copyright, like Fair Use, applies.