It reminds me of something I do in my current occupation, with a robot. It makes predictions about how a certain motor movement will result in a change in position, then measures progress in the real world. Should the prediction and reality diverge significantly (more than a particular amount), it stops and calls a human to look into what happened. I can imagine AI techniques using this kind of thing to guess what will happen next in a series of events, with the result's divergance from the guess weighting the learning rather than a steadily decreasing weight. Perhaps this is already a thing though, I'm no AI researcher

i do not believe that young children explicitly/consciously simulate in their minds to learn cause and effect and other things, though this might be up for debate

There's things like metaphors, slang, topical references, all things that end up in conversations that change regularly in their meaning and usage. Then there's the unspoken parts of conversations. The implications behind different wordings, ways of writing things, words left unsaid, sarcasm, tone(even in text tone is conveyed in some form).

Humans do all these things while conversing almost subconsciously, each individual person does these things and comprehends these things uniquely based on years and years of sensory input and model building from a huge variety of sources, in a way that's individually unique and poorly understood. How would you even begin to train a model to even a remote semblance of that?

The gulf between even the most disparate human tribes is nothing compared to the gulf between an AI chat-bot and a human being.

I think it's entirely possible to make bots with simple models of the world. (Not that this is really a move any closer to that)

But that is basically what humans do - we don't run internal simulations, we have a model we've trained over a lifetime of experiences with the world that judges the likelihood of a given scenario

(Reading TheBookOfNow and Causality in parallel)