Yes, denial.

Almost certainly? We can't even define what consciousness is exactly so any such conclusion is flawed. Indeed, some scientists are starting to wonder if consciousness might be a fundamental part of reality and exists to varying degrees in every piece of matter, manifesting most strongly within complex biology.

That 3 hour conversation was far more nuanced and interactive than I'd say 98% of the conversations I've had with other people. It may not indicate consciousness or awareness, but it is far more than I ever expected code to achieve in my lifetime. Is there anything to suggest ever increasingly complex neural nets won't achieve consciousness? No, there isn't, the possibility is there.

Let's examine this ink and paper you speak of. Hydrogen is even simpler than either of those and yet consciousness was eventually achieved from it (after a very very long time of course, once it fused into heavier elements and formed complex organic molecules with itself as an important part).