Try it. Write a simple original mystery story, and then ask a good model to solve it.
This isn't your father's Chinese Room. It couldn't solve original brainteasers and puzzles if it were.
I'm not saying this is the right way to write a book but it is a way some people write at least! And one LLMs seem capable of doing. (though isn't a book outline pretty much the same as a coding plan and well within their wheelhouse?)
Whether or not the model are "understanding" is ultimately immaterial, as their ability to do things is all that matters.
And just because you have no understanding of what "understanding" means, doesn't mean nobody does.
If it's not a functional understating that allows to replicate functionality of understanding, is it the real understanding?
But here is a really big one of those if you want it: https://arxiv.org/abs/2401.17377
They still output words through (except for multi-modal LLMs) so that does involve next word generation.