Going to be extremely opinionated and straightforward here in service of being concise, please excuse me if it sounds rough or wrong, feel free to follow-up:
You're "not even wrong", in that you don't really need to worry about ratio of input to output, or worry about inducing hallucinations.
I feel like things went generally off-track once people in the ecosystem turned RAG into these weird multi-stage diagrams when really it's just "hey, the model doesn't know everything, we should probably give it web pages / documents with info in it"
I think virtually all people hacking on this stuff daily would quietly admit that the large context sizes don't seem to be transformative. Like, I thought it meant I could throw a whole textbook in and get incredibly rich detailed answers to questions. But it doesn't. It still sort of talks the way it talks, but obviously now it has a lot more information to work with.
Thinking out loud: maybe the way I think about it is the base weights are lossy and unreliable. But, if the information is in the context, that is "lossless". The only time I see it gets things wrong is when the information itself is formatted weird.
All that to say, in practice, I don't see much gains in question-answering* when I provided > 4K tokens.
But, the large context sizes are still nice because A) I don't need to worry as much about losing previous messages / pushing out history when I add documents as when it was just 4K for ChatGPT. B) It's really nice for stuff like information extraction, ex. I can give it a USMLE PDF and have it extract Q+A without having to batch it into like 30 separate queries and reassamble. C) There's some obvious cases where the long context length helps, ex. if you know for sure a 100 page document has some very specific info in it, you're looking for a specific answer, and you just don't wanna look it up again, perfect!
* I've been working on "Siri/Google Assistant but cross platform and on LLMs", RAG + local + on all platforms + sync engine for about a [REDACTED]. It can nail ~every question at a high level, modulo my MD friend needs to use GPT-4 for that to happen. The failures I see are if I ask "what's the lakers next game", and my web page => text algo can't do much with tables, so it's formatted in a way that causes it to error.