I can kind of see regulations coming that make neurally compressed image or video data are require to have a little Ⓝ on-screen graphic in one of the corners, in addition to (not necessarily perceivable) watermarks that can make even small crops of the image identifiable as neurally generated. And that is probably the best case.

In the worst case (and more likely?), we are going to ban computational substrates large enough to perfectly forge important data altogether because it will be too easy to misuse. We‘d essentially go back to ~1960s electronics to have at least halfway functioning mechanisms of creating social trust, namely high-bandwidth personal interactions where every thought and every action has a high chance of leaving a trace in the real world and thus contributing to someone’s reputation. No blockchain and no other technology can create nearly as much trust as that without being highly prone to misuse.

It could be a problem if it hallucinates the wrong license plate number at a crime scene. If all you want is a gigantic 8K resolution stock photo of a woman holding her baby in front of a laptop without devouring 10 MB of the user's data cap, it may be fine if the woman has a slightly different (but still highly detailed) hair style.

It would always decompress the same way, so for artistic purposes, if you preview it and it looks good, it is good.

But if you're using photography to look at things in the world, that's a whole different story.

If fuzziness and compression artifacts are a signal, it makes sense that eliminating them would reduce filesize.