This is a great post and I agree with you on the issues with distillation. I do still feel it's ironic for an AI lab.

As long as labs do not heavily kneecap model outputs, practically all this applies to the training corpus as well.

AI gives ruthless users of AI a leg up over the people who's data it was trained on. "We took the products of your work and used them to undercut you". It's all the same.

The only way I'd be against distilling would be if AI models became owned by the public who's work is used to create them. Of course the AI labs should be paid well, but these models are a product of the entire world's efforts, not only the labs.