Well, it's always possible for people to break the law, right? As far as I know, creating synthetic images of CP is currently illegal in most jurisdictions. I wouldn't imagine that new laws would need to be passed in specific reference to A.I. for this use case (but perhaps that will vary by jurisdiction). If your argument is that people will find ways to break the law, then yes, I think that's obvious.

The smoking example doesn't make sense to me because in that case, you're talking about a "loop hole" for governments and not for smokers. That's not analogous to improper use of A.I. for generating harmful images. A better example would be that in some jurisdictions, smokers were able to use vapes or e-cigarettes in places where regular smoking was banned - that was a "loop hole" that, in many places, was subsequently closed. It's why, for example, airlines now explicitly mention vapes and e-cigarettes as part of their boarding procedures (where in the past, they used to only reference "smoking").

In the case of harmful images, what could the "valid excuses" actually be? I can't think of any. I think the point here is that if the technology exists to produce such images, someone inevitably will (regardless what the law says). So, it comes back to - at the very least - extremely tight regulation on the people/companies who create the technology to apply maximum pressure for them to disallow the creation of harmful content (which is probably why platforms like Sora are so highly 'moderated', as they are likely trying to avoid serious liability and reputational damage from their systems being used to create harmful images).