My point is that say every artist gets some small token payment once, and then what? That's not enough to live on, so we're right back to square one and we've solved nothing.

Incidentally yes, training AI on AI output will work fine, as long as you have a signal of quality. For example, upvotes in a subreddit would work fine. But that's not crucial to my point, which is that what OP is asking for will accomplish exactly nothing.