It's crazy that we went from "we found a significant number of students used AI in our course and gave them a 0" to "yeah they all use it we can't stop it". Basically just accepting widespread cheating, normalizing and accepting the complete abandonment of the first lesson in ethics we are taught and held to in academia.

I know this is absolutely impossible because colleges and universities have headed in completely the opposite direction, but the solution: Literally just expel them. Just like they did when people cheated when I was in college. Don't make it a small punishment so that they turn it into a risk/reward assessment. Colleges are overpopulated anyway; just trim the fat of students who shouldn't be there. Do a follow up oral exam interview about their project and if they can't explain what someone like me spent 30+ hours building and can speak about for 4 hours if asked, then expel them. They can make your coffee at the nearby Starbucks, who cares.

If you don't do this then understand that you are telling your students not using AI that they will need to begin cheating like the others to be able to keep up with the changes. OP mentioned they massively increased the scope of their assignments, which means OP is forcing their students to use AI now.