We're just seeing that the copyright emperor has no clothes: companies want to infringe upon others' rights through a copyright laundering machine, but of course will insist that the laundered code they use is their property, protected by the holy copyright cudgel.

I don't think so. Because LLMs aren't legal persons (yet?!), they can neither have copyright to anything nor violate someone else's copyright. IANAL but the most reasonable legal interpretation is likely that any IP violations are actually committed by whoever it was who asked an LLM to "rewrite" something in a way that obviously counts as a derived work rather than a cleanroom implementation.

Correct.

You are misinterpreting my use of the word 'allow'. Think of it as 'enables' or 'makes it possible'. It is fairly obvious that AI does not grant permission as well as that there was no reference to any legal proceedings.