You seem pretty confident that LLMs cannot have an internal representation simply because you cannot imagine how that capability could emerge from their architecture. Yet we have the same fundamental problem with the human brain and have no problem asserting that humans are capable of internal representation. LLMs adhere to grammar rules, present information with a logical flow, express relationships between different concepts. Is this not evidence of, at the very least, an internal representation of grammar?
We take in external stimuli and peform billions of operations on them. This is internal representation. An LLM takes in external stimuli and performs billions of operations on them. But the latter is incapable of internal representation?
And I don't buy the idea that hallucinations are evidence that there is no internal representation. We hallucinate. An internal representation does not need to be "correct" to exist.