[JohnBooty]

     once the context is far away enough you ask, 
     what was the driver doing again?

Have you tried this with humans?

For a sufficiently large value of "far away enough" this will absolutely confuse any human as well.

At which point they may ask for clarification, or.... respond in a manner that is not terribly different from an LLM "hallucination" in an attempt to spare you and/or them from embarrassment, i.e. "playing along"

A hallucination is certainly not a uniquely LLM trait; lots of people (including world leaders) confidently spout the purest counterfactural garbage.

    Its like a conversation with someone with short 
    term memory loss like in memento

That's still a human with a sound theory of mind. By your logic, somebody with memory issues like that character... is not human? Or...?

I actually am probably on your side here. I do not see these LLMs as being close to AGI. But I think your particular arguments are not sound.