I don't believe it's the SE itself that encrypts user data so it must already be the case that the key is generated outside the SE, sent to it for storage, and is retrieved if the user is authenticated.

So the difference between Apple generating the key on device and storing it in the SE and the user generating it and storing it in the SE is that the user can use a known-secure key generation algo. If Apple generates the key you can't be sure it's cryptographically secure and doesn't have a backdoor.