I think enforced disclosure is the most sustainable way of dealing with AI content long term. I completely understand people wanting to make informed decisions about where the content they consume comes from, and I wouldn't intentionally use AI assets in my own work.
Banning it completely could lead to human creations being unfairly penalized for perceived resemblance to AI (as has happened in academic settings), and removes the possibility of use for criticism and review—or even honest mistakes, as people not educated on the details of AI may not realize some of the tools they use could be considered AI.
Plus, there are legitimately creative human works, including on Itch, that have used AI assets. The early builds of The Roottrees Are Dead, for instance, used AI art. While I think the AI art was the weakest part of the game, the game was fully written, coded, and performed by humans, and the version now in development with fully human-created art may not have existed without those early builds.
So I think this is a healthy choice, and I'd like to see more clarity on what "generative AI" is considered to be for the purposes of tagging, as well as what the appeal process would look like if work is incorrectly reported as untagged genAI.