"f downloading massive torrents of pirated copies of books and processing them."
Downloading isn't piracy, please read copyright code.
" to generate new content, "
What a misleading phrase.
" much of which non-factual in nature,"
It's called Fiction. Your library has a whole section.
"and often very arguably explicitly creatively derivative."
Not really.. or no more then people who write.
prompt: "Make a story like sleeping beauty" ... 2 seconds later we have "The Moonlit Princess" and we'll just self-publish that on Amazon... boom I'm an author!
Make a story based on open content. that's bad.. why?
" just self-publish that on Amazon"
And that's bad, why?
"boom I'm an author!"
correct. and? also, you are the author of a work that can't be copyrighted.
"You seriously telling me this is NOT copyright infringement? "
It is not. Not be any definition is the infringement. It's a different telling. You are letting your hate of AI suppress your critical thinking.
"the prose above is a pretty blatant Disney ripoff."
No, it isn't. but guess what? people write is style similar all the time. It's not copyright infringement.