They just redefined the term so that they no longer call hallucinations that are useful hallucinations.

But the people who say everything LLMs do is hallucinate clearly also make that distinction, they just refuse to rename the useful hallucinations.

"How many legs does a dog have if you call his tail a leg? Four. Saying that a tail is a leg doesn't make it a leg." -- Abraham Lincoln

I'd say a humans ability to reason with theoretical situations like this is our very core of creativity and intelligence, though. This quote makes sense for a policy maker, but not a scientist.

Now granted, we also need to back up those notions with rigorous testing and observation, but those "if a tail is a leg" theoretical is the basis of the reasoning.