1) When artists 'steal' from others, they generally build something 'new'. AI can't really create anything 'new'. Case in point: Umberto Eco's The Name Of The Rose steals the plot and outline from crime stories, steals the library idea from Borges, and steals the murderer's motive from Eco's medieval manuscript (forgot which one). Yet the outcome is something completely new. Same goes for hip-hop music; sampling is at its core, but the final music that comes out is nothing like what it samples, the samples are just a part of something new.
2) when artists steal from each other, it's generally poor artists ripping off other poor artists. No money can flow. When a million/billion-dollar company rips off poor artists to make more money via generative AI it's a different story. Money could flow but it doesn't.
To your second point, most of the work I've seen generated from these models were done for free. It could be argued that these tools add to an artists toolbox rather than take something away. I can see for example where one poor artist could create a computer game of the same quality that it takes a triple-AAA game company to do today. Is that good or bad?
ChatGPT is able to write lyrics about a topic of my or its choice in the style of an unrelated philosopher for example. It creates something new by mixing ideas from different modalities.
In an AI laden world
1) How are artists relevant
2) How are artists fairly compensated
I believe the answer to 1) is as you say, simply in the word 'new'. AI functionally remixes toward a mean. You can improve the impression of this with exquisite sources or more nuanced algorithms, but the result is always, literally, average.
I believe that an artist works out of an authentic story that is much more than the sum of their influences, and is uniquely their own. This story is the value proposition that is offered to an appreciant - it is an expression of identity that rises above the noise, and that can be joined. Mechanisms of payment have changed with the gyrations of technology, culture, and power since the concept of 'art' was birthed. But as long as there is a distinctive story in an artist's work, I believe there will always be a path to compensation.
And which is closer to the truth?
You can only share it because people fed you, clothed you, educated you. Countless squintillions of interactions and evolutions, in nature, in humanity, in culture and science and art and language, in the very cosmos, went into putting you in the position you were when you created the "completely new" thing.
However, one of the things that people do is go into bubbles - religious bubbles, ego bubbles, psychotic delusions, etc. It can be powerful to give yourself all the credit for your work. It can be motivating, comforting, and generally advantageous sometimes to think that God has your back, that your tribe is chosen above others.
Think of all the performers with diva complexes - those complexes serve a role in helping them. It's absurd and kind of sad from the outside, but it works for those people to believe that they're the greatest.
But the truth that they're all forgetting is that they had teachers, helpers, warriors, workers, people of all kinds supporting them to get to the position they're in. They all had ancestors who broke their backs to bring them into the world and protect them. They've all eaten thousands of pounds of food grown with exploited labour. They've all benefited from countless artists and creators enriching the local and global culture.
So, I can see why someone might believe, or even choose to believe that they "made the entirety" of a thing... But it's not the truth - not even close. A wider and less egoistic perspective might not help them create or believe in themselves, but if we're talking about a broader truth than one person's viewpoint, it's utterly absurd, wholly delusional, to give yourself that much credit. I think it's a sign of sickness in our culture that any of this is news to people.