The real question about AI isn't "is it awake?" It's whether waking and dreaming are even the categories we should be using.

I think this is the sharpest thing in your post, and I mostly agree with your framing about the debate being misdirection. But I want to push back on the Libet argument specifically, because I think it actually undermines the point you're trying to make rather than supporting it.

You're using Libet to suggest humans are more mechanical than we admit, which should make the AI/human distinction less meaningful. The problem is that Libet's methodology has been seriously contested — the original studies relied on subjective self-report of "when" the intention arose, which is exactly the kind of introspective data that's suspect if we're questioning consciousness as a reliable narrator. Later replications using more rigorous timing methods have produced mixed results. I don't think you can build a case for human automatism on that foundation without it crumbling.

Where I do agree with you is the broader point about consciousness not being a possession. In my dream journal work over the past few years, I've noticed that the "I" who appears in dreams isn't a stable entity — it shifts, fragments, sometimes disappears entirely while the dream continues. That's pushed me toward thinking consciousness is more like a pattern that arises under certain conditions than a thing that's present or absent.

But here's where I'd resist the equivalence you seem to be gesturing toward: those dream states still have embodiment. Even when the sense of self dissolves in a dream, there's physiological arousal, there's sleep architecture, there's a nervous system doing something. The Magician analogy works if you're talking about patterns of transformation, sure. But the Magician is still a body sitting at a table. AI is pattern without the substrate that, in humans, seems to produce the states we're actually arguing about.

So yeah — the binary "is it conscious or not" framing is bankrupt. But I don't think that gets us to "we're basically the same as machines." It might just mean both categories are more strange than either side wants to admit.