Interestingly i believe this is a limitation that one of the newest (as yet unreleased) diffusion models has overcome, called DeepFloyd; a number of examples have been teased already, such as the following Corgi sitting in a sushi doghouse:
https://twitter.com/EMostaque/status/1615884867304054785?t=jmvO8rvQOD1YJ56JxiWQKQ&s=19
As such the quoted paragraphs surprised me as an instance of a straightforwardly falsifiable claim in the documents.
Reasonable points, all! I agree that the conflation of legality and morality has warped the discourse around this; in particular the idea of Stable Diffusion and such regurgitating copyrighted imagery strikes me as a red herring, since the ability to do this is as old as the photocopier and legally quite well-understood.
It actually does seem to me, then, that style copying is a bigger problem than straightforward regurgitation, since new images in a style are the thing that you would ordinarily need to go to an artist for; but the biggest problem of all is that fundamentally all art styles are imperfect but pretty good substitutes in the market for all other art styles.
(Most popular of all the art styles—to judge by a sampling of images online—is hyperrealism, which is obviously a style that nobody can lay either legal OR moral claim to.)
So i think that if Stability tomorrow came out with a totally unimpeachable version of SD with no copyrighted data of any kind (but with a similarly high quality of output) we would have, essentially, the same set of problems for artists.