Losing context is only part of the issue. LLMs don't have the rich connection to the world that humans have. The only connection LLMs have with anything is streams of text. Not only don't they have eyes, ears, smell, taste, touch--they don't have bodies. They don't have to deal with the real, physical world and have it push back on them.

That is so utterly different from what we humans are used to that we can't even comprehend it, and we anthropomorphize LLMs because we can't make any sense of them otherwise. We can't comprehend that these things that emit text that looks like human text don't have all of the other things that lie underneath our words when we humans talk.