Those are not hallucinated. PR B still contains all the old commits of A which means merging would apply them twice. The changes in PR B are computed according to the oldest commits belonging to PR B and main which is the parent of squashed A. That would essentially means applying A twice which is not good.
As for updating PR B, PR B doesn't know where PR A (that are also in PR B) ends because PR A is not in main. Squashed A is a new commit and its diff corresponds to the diff of a range of commits in PR B (the old commits of PR A), not the whole B. There's a lot of metadata you'd need to store to be able to update PR B.