> Terminology-wise, does this read like a better title instead?:

Generates does not convey any info on the nature of the process used to create the output. In this context, extrapolates or predicts or explores sound more suitable.

But nitpicking over these words is pointless and represents going off on a tangent. The use of the term "hallucination" reffers to the specific mechanism used to generate this type of output. Just like prompting a model to transcode a document and thus generating an output that doesn't match any established format.

I'd vote for imagines.