I think the whole fascination about AI is simply convenience. Sure, it is cool to generate some simple blank story about a topic, but it's not a real production. Real storywriting goes being convenience, because it requires planning and plotting to make it all connected. As far as of now, AI is unable to reach any sort of progression beyond the very basic. Also, its sense of coherency is very lacking.
As you said, AI misses the experience of living. It can't understand and reproduce the sensation of grief, hate, love, like great books out there can. It can try to mimic, but it's so artificial you can't really dig it. Also, for it only bases out of a database, it doesn't generate a writing style. It's the very same descriptive text with way too many dispensable adjectives.
After long testing, I've learned how to cheese and model narrative in chatgpt, Gemini, Llama and a few others, but didn't get anything besides the sameness they make. That's why I'll continue to admire well-written stories and, most importantly, those who make them. I love your writing style and I'm eager to see what you'll pull up in the next games!