I don't think it is dualist, or at least I didn't get that impression reading Dreyfus. It is more that knowledge is part of a system as a whole and cannot be captured piecemeal, which is how we'd have to do it if we created AI by hand.

But, I don't think that argument is especially strong. Knowledge doesn't seem to be tied up in the system, otherwise we wouldn't have abstract subjects like math. Additionally, if knowledge is a function of a certain process of developmwnt, we can at least in theory reproduce any physical process computationally.