Why is your criteria for "on the path towards AGI" so absolutist? For it to be on the path towards AGI and not simply AGI it has to be deficient in some way. Why does the current failure modes tell you its on the wrong path? Yes, it has some interesting failure modes. The failure mode you mention is in fact very similar to human failure modes. We very much are prone to substituting the expected pattern when presented with a 99% match to a pattern previously seen. They also have a lot of inhuman failure modes as well. But so what, they aren't human. Their training regimes are very dissimilar to ours and so we should expect some alien failure modes owing to this. This doesn't strike me as good reason to think they're not on the path towards AGI.

Yes, LLMs aren't very good at reasoning and have weird failure modes. But why is this evidence that its on the wrong path, and not that it just needs more development that builds on prior successes?

Well the problem with that approach is that LLMs are still both incredibly dumb and small, at least compared to the what, 700T params of a human brain? Can't compare the two directly, especially when one has a massive recall advantage that skews the perception of that. But there is still some inteligence under there that's not just memorization. Not much, but some.

So if you present a novel problem it would need to be extremely simple, not something that you couldn't solve when drunk and half awake. Completely novel, but extremely simple. I think that's testable.