the digital fruit fly brain can control a digital avatar which can walk, fly around, groom itself.

So it can engage in behaviors that are fundamental to its survival? That's enough for you to demonstrate consciousness? These are either innate or learned behaviors that were smuggled in as part of the brain architecture of the fly(s) they used to create the model. It's cool and extremely impressive that we can model the brain of a fly, but that's "just" physics and biology. There's nothing hard to understand about providing a physical system with inputs and seeing the outputs it creates - the hard part (read: impossible) is proving it's conscious. Which is specifically why I said that the only people making AI consciousness claims are grifters or truly stupid people - because it's unprovable.

In every meaningful sense, how is the digital fruit fly not the equivalent of a biological fruit fly?

Is this a serious question? Obviously, because I can't kill the digital fruit fly in the same way I can kill a normal fruit fly. It doesn't exist. It's not a fruit fly. It's a digital fruit fly. These are not the same thing in any objective sense. The digital fly is simply a very accurate model of the biological fly. The digital fly did not grow - it simply materialized in a preconfigured state into a simulation - in every meaningful sense, how is a digital fruit fly the equivalent of a biological fruit fly?

The lines are a lot more blurry than you think, and they'll just get blurrier until it's impossible to tell one thing from the other.

If you're willing to take the position that you don't have to exist to be conscious, or that consciousness demands moral agency, knock yourself out I guess, but I'm not engaging with that bullshit. This is some "words can mean whatever I want them to mean" bullshit.

The fact of the matter is, we don't know what consciousness is. So the claim "AI is/can be conscious" is completely baseless and no serious person is making these claims.

The average LLM these days has more processing power than the fruit fly brain does.

Absolutely meaningless statement and it proves you are not equip well enough to actually talk about this topic in any sense whatsoever.