>The source material was a compact cassette tape from a demo, found in a drawer.

Was this demo his, or someone else’s IP? If he is cleaning up or modifying his own property, not a lot of people have a problem with that.

If it is someone else’s work, then modifying with AI doesn’t change that.

I think they just don’t want AI generated works that only mash up the work of other artists, which is the default of AI generated stuff.