I think individual special effects sound very plausible. "Okay, robot, make it so that his arm gets vaporized by an incoming laser, kinda like the same effect in Iron Man 7" is believable to me.

But ultimately these things copy other stuff. Artists are often trying to create something that is, at least a bit, new. New is where this approach falls over. By its nature, these things paint from examples. They can design Rococo things because they have seen many Rococo things and know what the word means. But they can't come up with a new style and use it consistently. "Make a video game with a fun and unique mechanic" is not something these things could ever do.

I think it's certainly possible, maybe inevitable, that some AI system in the distant future could do that, but it won't be based on this style of algorithm. An algorithm that can take "make a fun romantic comedy with themes of loneliness" and make something award worthy will be a lot closer to AGI than it will be to this stuff.