> In training, the model is trained to predict the exact sequence of words of a text. In other words, it is reproducing the text repeatedly for its own trainings.
That's called extreme overfitting. Proper training is supposed to give subtle nudges toward matching each source of text, and zillions of nudges slowly bring the whole thing into shape based on overall statistics and not any particular sources. (But that does require properly removing duplicate sources of very popular text which seems to be an unsolved problem.)
So your analogy is far enough off that I can't give it a good reply.
> It seems many people feel this is "fair use" when it happens on a computer, but would call it "stealing" if I pirated all the books of JK Rowling to train myself to be a better mimicker of her style.
I haven't seen anyone defend the piracy, and the piracy is what this settlement is about.
People are defending the training itself.
And I don't think anyone would seriously say the AI version is fair use but the human version isn't. You really think "many people" feel that way?