And if players oppose AI from a moral stand point, than making an exception for code, is misleading to the end users, who don’t know the intricacies of the AI disclosure criteria.

I completely agree, Steam's disclosure rules don't work for anyone who wants to avoid AI from a moral standpoint.

It is the bugs that break games and make the experience mesirerable.

Yes, bugs break games, but also buggy games always existed and reviews and public opinion have always handled informing potential buyers of that. I know there are games which are incredibly buggy because they were vide coded, I played them and was disappointed. But I also have no doubt that there are games that are less buggy because the devs use AI to check the code they write for problems. Just like all the news stories we hear about security vulnerabilities being found due to AI scanning, so are mundane bugs found with AI scanning.

Vibe coded code? Yes will have bugs. Human written code with additional AI review will have less bugs. You would still want to avoid it if you have a moral issue with it of course, but it is higher quality than if AI wasn't used. Putting it all in one bucket is misleading.

Why should AI generated assets be disclosed but not AI generated code.

Because games are art, people play them to experience something another human being created. There is no excuse for AI generated asset, and they always bring the quality of the game down. While AI assisted code can bring the quality of the game up, it's not as black and white. Though it often doesn't.