To be fair all of what you've said applies to humans too. Look how many flat earthers there are and even more people that believe in homeopathy or think that vaccines give you autism, think that aliens built the pyramids.
But nobody calls that "hallucinations" in humans. Are LLMs perfect? Definitely not. Are they useful? Somewhat; but definitely extremely far from PhD level intelligence as some claim.
But there are things LLMs are why better than any single human already (not collectively). Giving you a hint (doesn't have to be 100% accurate) what topics to look up if you can just describe is vaguely but don't know what you would even search for in a traditional search engine.
Of course you can not trust it blindly, but you shouldn't trust humans blindly either, that's we we have the scientific method, because humans are unreliable too.