I'm kind of mixed on these AI mods that basically combine two games in one, even if they were made with separate engines.

On one hand, yes, they are pretty dreamy. The closest we had to this previously were probably Garry's Mod, people importing maps/models into different games, and old games appearing in new games as mini-games that affect said new games. I think all of this would still have happened without AI though. You need to be very familiar with both games you are working with, but advances in decompiling were going on long before AI so it was probably inevitable anyway, but AI is going to churn out these at a faster rate. I had similar ideas of combining games before via emulators emulating two games at once and having the ROMs exchange RAM data between each other, but AI has beaten me to the punch.

But on the other hand, I feel if you can get AI to do this (something that no human has done to my knowledge), then traditional gamedev is out the window. I feel like one of those anti-AI extremists by saying this, but I'm not anti-AI. I've used AI for my last game (generating backgrounds). I only use it as a last resort, but writing an entire game in AI is not my thing. I would never play a game written entirely by AI, even if the design doc was written by a human.

Look at it this way, the indie market is already saturated and this will make it even worse. I know itch.io has the option to filter AI generated content, but like I said, I'm not an anti-AI extremist/ I don't care if you use AI to generate *some* parts of your game, but there are some who have literally called for violence because someone used AI to generate BGM or enhanced the sprites or whatever. We also live in a world where if you accept one idea then you are expected to accept a package of ideas even if they aren't related. These people also want me to share their same opinion on cryptocurrencies and other stuff.

Also, what happens if AI model collapse (when AI starts feeding on it's own data, leading to worse output) does happen? Then all of this would just be lightning in a bottle, unless people are able to make these fusion mods manually.

Though I think the reason why these mods in particular leave a slightly sour taste in my mouth is because most of my game ideas come from combining ideas from my favorite games together and these mods do exactly that. At least my games have original IP so there's that.