I've been successfully using local LLMs for the past few months on equipment ranging from AMD 395+ strix halo, to dual nvidia gpus with 96GB ampere, to 24GB dual 3060, etc. They all produce text gen at almost readable rates. You can read the thinking traces, the editting of code in the opencode harness, etc.
Along that same use, I've never touched any cloud service for code gen, and looked at docs or arena LLM. From my POV, it seems like a lot of people arn't even paying attention to the LLMs output when they generate their projects. So I don't find it hard to believe there's seemingly intelligent people being swindled by LLMs, big or small, because they do make bizarre assumptions and go into code edits that don't make sense even when they appeared to be running.
Then there's people that say they're in the ballpark of 500k context before they even get to work on something where these local models struggle when they get up to 100k both from generating and keeping scope on what they're doing. This is managed by opencode plugin dynamic-context-pruning that has the LLM rewrite sections of the context into summaries, while keeping the working context. It works pretty wel where a session then gets into ~500k where the working increments from 30k-80k of useful life.
So, I think we all underestimate how easily people can be swindled into poor development behaviors and _one_ reason, is the large cloud models just dump way more changes along a scope and can easily poison a whole chain of a feature or app implementation.
So the OP above who got 3 months into an app they think is hitting a dead end is recognizable as having one idea in their head of what's being built and the LLM building something subtly different because they're inevitably only reviewing the things that confirm the specs in their head and don't look for the edge cases that break it.