I think that is overly simplistic. Embeddings used for LLMs do definitely include a concept of what things mean and the relationship of things to other things.

E.g., compare the embeddings of Paris, Athens, and London to other cities and they will have small cosine distance between them. Compare France, Greece, and England and same. Then very interestingly, look at Paris - France, Athens - Greece, London - England and you'll find the resulting vectors all align (fundamentally the vector operation seems to account for the relationship "is the capital of"). Then go a step further, compare those vector to Paris - US, Athens - US, London - Canada. You'll see the previous set are not aligned with these nearly as much but these are aligned with each other (relationship being something like "is a smaller city in this countrry, named after a famous city in some other country")

The way attention works there is a whole bunch of semantic meaning baked into embeddings, and by comparing embeddings you can get to pragmatic meaning as well.

That's kind of a given though. It's a large language model, so of course its "understanding" can only be in terms of language. In a way, words are its only sense (input), and only way to interact with the world (output). The mechanism isn't really important, imo, since we could reduce our own understanding to chemical reactions.

Homo sapiens have many more dimensions of awareness, dozens maybe including sight, hearing, time, pressure, acceleration, etc., and we've been collecting data from them all 24/7 since embryo, plus instinct (pre-baked weights) from millions of years of evolution. We know that people born without a sense, let's say vision cannot conceptualize visually, even when their sight is restored for a time. I remember reading awhile back that a person born blind had their vision fixed, but they didn't know what "pointy" looked like. They couldn't know. Do they have a lower quality understanding of a word?

My point being, I don't think it's fair to objectively compare understanding between a person and a model without a testable definition of that word. Imo, and feel free to disagree, understanding is no different than merely knowing, it's just implied that the knowledge is deeper, across multiple dimensions of awareness, including subconscious awareness of our own hormones.