I want to get away from posturing about the politics of AI, and focus on the fact that this trailer is, unfortunately, pretty crappy. I get what the guy was going for. I get that he's a fan of both LotR and Ghibli. I get that this is a fan creation. But it's also blatantly obvious that the fake trailer displays little knowledge of what makes film or animation good.
Let's start an analysis by looking at one of the most iconic parts of the "What if?" trailer. From the time stamps of 0:41~0:47, you have the famous Council of Elrond, and the legendary "My sword, my bow, and my axe" dialogue. Absolutely powerful stuff. Now, take a look at the same sequence in the original trailer, at roughly the same time stamp (re-linking here to avoid watching the side-by-side version on Twitter):
The first and obviously horrible misstep in the What If trailer is noticed before Aragorn even starts talking. In the original scene, as seen in the original trailer, Aragorn makes a step down to face Frodo at his level. This is a critical action, with deep meaning. He is intentionally and purposefully lowering his height to Frodo's height. This is important both symbolically and visually. However, in the What If trailer, this is truncated to Aragorn making a small lean forward. It robs the action of all meaning, and shows a distinct lack of visual understanding of the scene.
Next, let's look at something as simple as the framing of the characters. Everyone in this scene (Aragorn, Legolas, Gimli) is shown in a tight close up that crops off the top of their heads, and focusses on their faces (the same thing was done with Gandalf earlier in the trailer). As introductions to these characters, this is critical. The original LotR trailer was making a very clear point by showing off both the real-ness of the visuals, and the abilities of the actors. Remember, LotR (and fantasy stuff in general) had been done in animation before; one of the major reasons for all the hype around Jackson's LotR (especially the first in the trilogy) was that it was live action. The framing is designed specifically to show this off.
Focussing specifically on Gimli shows how badly the What If trailers screws this up. In the live action trailer, you can see the snarl of John Rhys-Davies lower lip, the visible bottom teeth giving the agressive impression of a slight underbite, the intensity of his eyes as they slightly squint, and a subtle move forward that projects both intensity and action. In the What If trailer, you get literally none of that. Instead you get this:
All of the intensity is gone; Gimli looks almost sleepy. Absolutely none of the acting is preserved, and even less of the detail. Even the motion is muted. It's an insulting introduction to the character.
It should be noted that one major facets of the What If failure is that it fails to recognize the differences in medium between live action film and animation. If you go back and look at trailers for real Ghibli films, you'll find that introduction scenes rarely show characters with this tight framing. Instead, more zoomed out shots are typical. This can give the viewer a better idea of character design and allows animators more options to use different details and techniques to show emotion.
But, looking beyond my nerd-rage there, let's give the What If trailer some leeway because it was trying to do a shot-for-shot remake of the original trailer (despite the fact that some shots take more artistic license, but whatever...). If you're going to introduce a character this way, how would a Ghibli film do it? Like this shot introducing Yubaba in the Spirited Away trailer:
Notice the extra level of detail on the skin and hair. Notice the extra emotion in the eyes. If you go watch the real trailer, you'll see that the light in her earings is an active, flashing gleam of light that adds action and intensity. In short, this shot has everything that the live action LotR trailer has, and everything that the What If trailer doesn't. Proving that even if this isn't typical for the for the medium, it's still possible to do it right. Studio Ghibli does it right, and the What If trailer doesn't.
And that's just my review of 6 seconds of the What If trailer. The rest is, frankly, more of the same.
The What If trailer should not be considered a shot-for-shot copy of the original LotR trailer. It's basically fanfic level stuff. Crossing over two ideas without the proper understanding of what made either great, and losing the heart of both.
If you showed Hayao Miyazaki a copy of this, he wouldn't need to know whether or not it's AI to be insulted. No matter how it was made, its the equivalent of showing him a lower quality direct-to-video knock-off of his art. And he's a guy that takes his art seriously. It would be the equivalent of trying to get J.R.R. Tolkien to read a Hobbit/Scooby-Doo crossover and lecturing him about the world building in it. There's a time and place of this kind of stuff at a fan level. But frankly, it's not the kind or level of work I would want attached to my name if I was a professional in the industry.
TL;DR: Some stand on the shoulders of giants and reach higher. Others just like throwing rocks down the side and hearing them go "plunk". The pseudo Ghibli trailer is the latter. Fun, but not exactly respectable.
The above may be a harsh summary (perhaps an exaggeration, but if the trailer redone in Ghibli style is as you say, then in rightful respects, one would have to say you downright despise the books because you love the movies so much) but it bears reckoning that your criticism is rather ironic and hypocritical in consideration of what was said about the movies by the Tolkien estate at the time and many of the hardcore fans of the books.
I mean, if we get down to it, the movies are an abomination in relation to how they portray the books. Jackson changes things that have no reason to be changed at all (for example, why exclude Bombadil, who some see as a key part of the Fellowship of the Ring novel, or the Barrow Wights...and the deviations get worse in the next two movies).
Jackson did it flagrantly. He only got called on it when he did the EXACT same thing in the Hobbit movies. They were not really any more flagrant or bigger, just more people noticed.
I could write a much more detailed exposition about how the movies actually are far worse than the books themselves, and show no respect for the actual book or the author in the same way you did for the trailer.
I'd say the trailer actually shows far more respect for the movies than the movies do for the books.
That said, I made my peace long ago with those differences. They are different things. The movies are inspired by the books, and on themselves are great pieces of cinematography and art. They are perhaps some of the greatest cinematic pieces of the early 21st century.
I'd say someone doing this with AI on a full movie scale, if they could pull it off, would be a feat of AI and in the same way the movies are a callback to the novels, even if they don't respect or follow the same things, this could be similar in the same way.
As far as Ghibli itself and it's original creator...Which should we accept...The Cartoon Hobbit and Return of the King or this? (PS: I also love the Cartoon versions of these and in some ways consider them superior to the Live actions ones, but they are not true representations of the books either).
I think he (Miyazaki) would advocate for hand drawn animation (a quickly dying art) and categorize this in the same arena that he categorizes Disney 3d animation films that were coming out over the past 15 years. I'm not sure he would be a fan, but he would see how these things are catering to a different/Western Audience. He would feel his way is superior and better, but also realize the truth of the world around him and how it is changing and developing, while mourning our loss of artistic appreciation.