I think you're both correct but have different definitions of hallucinations. You're judging it as a hallucination based on the veracity of the output. Whereas Fowler is judging it based on the method by which the output is achieved. By that judgement, everything is a hallucination because the user cannot differentiate between when the LLM is telling the truth and isn't.
This is different from human hallucinations where it makes something up because of something wrong with the mind rather than some underlying issue with the brain's architecture.
> In the field of artificial intelligence (AI), a hallucination or artificial hallucination (also called confabulation,[1] or delusion)[2] is a response generated by AI that contains false or misleading information presented as fact.[3][4]
You say
> This is different from human hallucinations where it makes something up because of something wrong with the mind rather than some underlying issue with the brain's architecture.
For consistency you might as well say everything the human mind does is hallucination. It's the same sort of claim. This claim at least has the virtue of being taken seriously by people like Descartes.
They're using the term 'bullshit' as it is understood as a term of art, which doesn't imply lying. It's closer to creating a response without any regard for telling the truth. Bullshitting is often most effective when you happen to be telling the truth, although the bullshitter has no commitment to that.
This is different from human hallucinations where it makes something up because of something wrong with the mind rather than some underlying issue with the brain's architecture.