That assumes that there is no effective way to filter good from bad. But there is - both automated heuristics and manual training does this.

LLMs absolutely produce mediocre output in some ways, but it's not an inherent limitation caused by them "averaging" the internet. If that were the case there'd be a lot more typos, emojis and internet lingo by default. The fact that LLMs have these instantly recognisable stock ways of writing and stock phrases is a simple way of seeing that they don't simply produce "average" output in that very naive sense.