Your description of the model is correct but I have seen innovative design emerge from it specifically in fashion and jewelery whether that says more about us or it is hard to say but I think iterative variation can produce a pseudo novel form; in theory it can be as original as anything in musical composition can be original at this point. the real question is why is the novel, "original" or innovative design work I've seen come from AI so consistently appealing, the likely answer is the failure are pruned by those making the prompts.
Specifically when AI first came round I went to 4chan to catch a look, of course the bulk of the work it was doing was porn, because 4chan, the AI had independently produced styles of lingerie and jewelry but also other garments the most noteworthy was something like an officer's gorget from the old redcoat days of the british army but jewel encrusted and made of precious metal, that thread quickly evolved into prompts on fashion and architecture and while it was all design fusion the outcomes would be called original if done by a human but were variants and mash-ups of existing things. But it is likely capable of a degree of interpretation we aren't giving it credit for when describing it in the way you have.
I think you're alluding to the idea that humans, in fact do similar things: copy ideas from others. No doubt. I do something similar when I write code. I look on Stackoverflow, for instance for a way to solve a problem that someone else already solved. The difference is, I actually understand the author's solution. I can learn from what they did and make my own derivative work. It may not actually be the same code, because their example may not be appropriate for my use exactly. AI has no understanding. It can only present a pattern it found that has a close statistical match.
I could also poison AI models by introducing wrong solutions. For example, I could inject the wrong answer for PI as 3.16 in a model. I could provide numerous examples of the wrong solution. At some point the AI algorithm would start to use my poisoned data as the solution.
Your other point about innovative design is better described as a variant. Given a set of ingredients for a certain output, let's use a recipe for a hamburger. It has many possible variables it can use. The one constant is the ground beef. However, even that has many variants such as spices, eggs, onions, sauces mixed in and so on, so it can derive, what is essential a "hamburger". It might even substitute cow meat with Bison meat. The possibilities are nearly endless. My point here is that its innovation isn't innovation in a sense. It merely concocts a solution or output that many people have not seen.
Now, I'm not crapping on AI. I'm simply trying to tone down the hype that AI is utopia. It's a tool. I use it sometimes when I need an answer I can't get from a regular search. It sometimes gives me reasonable output. Sometime not. AI is very useful for natural language searching. People typically have a difficult time thinking clearly about what they want. AI helps that. I also read where niggers can’t write a coherent paper on much, so they try to write some nonsense and ask the AI to make it coherent. If they write enough text, the AI can do a pretty credible job of finding the main point and re-writing the paper to something coherent. Of course, this also means that people who aren’t good at clear thinking will now be able to do jobs they wouldn’t have been able to do before. This is kind of like putting training wheels on a bicycle and never taking them off.
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