As someone already pointed out, the "you can't copyright it if AI generated it, full stop" is about the only feasible interpretation that won't result in either an "everything generated by AI is copyright-eligible" scenario or every single application having to be decided on some criteria that will itself be challenged by those on the losing side.
On the other hand, the very act of prompting and re-prompting an AI until you get something that looks, subjectively to you, like a thing of beauty and IMHO is deserving of legal protection. Whether or not it should be treated as a wholly new work or as a derivative work depends on the same thing an existing "work based on other works" does - things like "is the other work recognizable" - "does the new work impact the commercial value of the previous works" and so on.
It is analogous to me hiring you (a human doing work for hire) to go search all the images of people in 10 magazines (all images presumably under copyright), find 10 with green eyes, 10 with red lipstick, and 10 with noses that are relatively narrow, then create combinations thereof using a blending technique (blend eyes from "green eyes set picture #1" with mouth from "red lipstick picture #1" with nose from "narrow nose picture #1") but change the eye color to blue and the lipstick to green and widen the nose. This will give you 1000 combinations to create. Then I will remove any generated faces that are "so close to the original that the result might be considered a derivative work under copyright law." I will then print out the rest, pick the 10 that I think have the most commercial value, then register my company's copyright on them.
You, my employee, may be doing the drawing, but I'm the one directing the scene (plus I hired you).
I very much doubt the copyright office would reject my application. I MIGHT have to face lawsuits from anyone who claimed I was infringing, but if I did my "reject close calls" filtering right, then by definition I would win every challenge when it got in front of a judge (if I lost, then I didn't do it right).
This is analogous to using an AI: I'm starting with many existing works, but I'm using a tool to selectively blend them in ways that will, hopefully, allow me to claim a completely new work. Even failing that, my creative use of the AI tool should allow me to claim copyright on this new work that contains, as a part of it, other works.
The key here is that I am using the AI tool creatively, not slavishly or trivially.