Humans engage in confabulation but they’re mostly aware of it. In some mental disorders they may not be aware; though statistically that is not too significant and no, we normally don’t confabulate as much as the current crop of AI aka LLMs.

As a tool LLMs are fantastic and am glad to look at them as solely as powerful tools. AGI is not here yet and maybe that’s a good thing. Who would want some kind of artificial intelligence that is capable of understanding us, that is capable of using psychological tricks on people, that could have different goals than us and so on.