It's definitely interesting to look at people's mental models around AI.
I don't know shit about the math that makes it work, but my mental model is basically - "A LLM is an additional tool in my toolbox which performs summarization, classification and text transformation tasks for me imperfectly, but overall pretty well."
Probably lots of flaws in that model but I just try to think like an engineer who's attempting to get a job done and staying up to date on his tooling.
But as you say there are people who have been fooled by the "AI" angle of all this, and they think they're witnessing the birth of a machine god or something. The example that really makes me throw up my hands is r/MyBoyfriendIsAI where you have women agreeing to marry the LLM and other nonsense that is unfathomable to the mentally well.
There's always been a subset of humans who believe unimaginably stupid things, like that there's a guy in the sky who throws lightning bolts when he's angry, or whatever. The interesting (as in frightening) trend in modernity is that instead of these moron cults forming around natural phenomena we're increasingly forming them around things that are human made. Sometimes we form them around the state and human leaders, increasingly we're forming them around technologies, in line with Arthur C. Clarke's third law - that "Any sufficiently advanced technology is indistinguishable from magic."
If I sound harsh it's because I am, we don't want these moron cults to win, the outcome would be terrible, some high tech version of the Dark Ages. Yet at this moment we have business and political leaders and countless run-of-the-mill tech world grifters who are leaning into the moron cult version of AI rather than encouraging people to just see it as another tool in the box.