It's diminished because the hard reality is that you need money to live.
The end result of major tech companies sweeping in, taking everyone's creative work, outcompeting the originals with AI derivatives, and telling every artist on the planet "fuck off, send a job application to McDonalds" is significantly less art.
Copyright was invented to prevent exactly this scenario.
Yes, which is why hackers and artists (at least those mainly publishing instead of mainly performing for a live audience) are ultimately not natural/inherent allies.
Hackers have usually drawn their funding from their (often lucrative) employment, which is what gave them the freedom to give away the products of their hacking for free.
One needs copyright to survive, the other see it as a means to enforce openness at best (those in favor of copyleft) and as an obstacle to their pursuit (owning the full system, liberating all aspects of and information about it) at worst.
This rift was always visible if you knew where to look, but AI is definitely wedging it wide open.