Nobody can say the same about LLMs, because nobody has managed to decipher them yet. This is an active area of research (Mechanistic Interpretability.)
Your post is conflating lossy discarding of information with extracting abstract concepts from information and encoding them into weights. This is why those weights do absolutely nothing until you run a prompt through them. On the other hand, obviously any media file can be decoded by itself without needing a prompt.
Those blocky compression artifacts you see are not hallucinations, they are the image viewer just filling in for missing details. You don't even need lossy compression for this; take a lossless image like a BMP and zoom in, you'll see those blocks again!
Interestingly, image viewers typically do this via interpolation of adjacent pixels, but a lot of hallucinations are actually the result of extrapolation, the opposite mechanism. Which is why LLMs can create output that was NEVER in any input data anywhere (hence the term "hallucination"!)
And if you think lossy compression is sufficient to avoid the "verbatim" requirement of copyright claims, you're welcome to explore the legality of selling transcoded versions of copyrighted content ;-)
I'm not sure what those links are in relation to?