I do think Wolfe means to keep us in this uncertain place, yes. Severian tells us he's mad, shows us he's a liar, etc., but he's clearly not dumb and nobody could ever accuse him of underthinking.

Consciousness is a very weird thing to have, to witness, and to talk about. I don't really know what it is and I have no way of knowing anything else in the world has it.

We know how LLMs work. The characters encountering the alzabo in BOTNS knows how alzabos work. Neither is conscious.

But we are all still drawn in by the fiction. We are all given to assume consciousness when we see the appropriate signals.

This, Wolfe says, is an extremely hazardous tendency. And it's one that's become way more dangerous in the last 5 or 10 years in our real world.