You lost this battle, sorry. It's not going to happen.

Both terms are "inaccurate" because we're talking about a computer program, not a person. However, at this point "hallucination" has been firmly cemented in public discourse. I don't work in tech, but all of my colleagues know what an AI hallucination is, as does my grandmother. It's only a matter of time until the word's alternate meaning gets added to the dictionary.

Obviously, hallucination is by definition a perception, so it incorrectly anthropomorphizes AI models. On the other hand, the term confabulation involves filling in gaps with fabrication, exactly what LLMs do (aka bullshitting).