I agree, this screams bug to me. Reading the thought process definitely seems damning, but a bug still seems like the most likely explanation.

Remember that "thought process" is just a metaphor that we use to describe what's happening. Under the hood, the "thought process" is just a response from the LLM that isn't shown to the user. It's not where the LLM's "conscience" or "consciousness" lives; and it's just as much of a bullshit generator as the rest of the reply.

Strange, but I can't say that it's "damning" in any conventional sense of the word.