My gut feeling is that the hallucinations are caused by the entropy. A UUID has unlikely character sequences. But the entropy is a core feature. Turning the UUID into words keeps the same entropy, you just have surprising words instead of surprising hex sequences.

I would be surprised if this actually helped with hallucinations. Happy to be proven wrong though, and this seems like an easy experiment to run: just take a tiny model (below 1B) and have it transcribe a couple thousand ids in both formats, then check where it made more mistakes