LLM proponents believe that these higher level encodings in latent space do in fact match the real world concepts described by our language(s).

However, a much simpler explanation for what we see with LLMs is that instead the higher level encodings in latent space match only the patterns of our language(s), and no deeper encoding/understanding is present.

It's Plato's Cave - the shadows on the wall are all an LLM ever sees, and somehow it is expected to derive the real reality behind them.

Could be, yes for sure but I think it would be very naive in the current state of progress we are in, to down play what progress is happening.

At least Mythos model with its 10 Trillion parameter might indicate that the scaling law is valid. Its a little bit unfortunate that we still don't know that much more about that model.