Appreciate the statements here. I played the demo when it first came out and while the idea of AI generated art being misused was being discussed at that time I don't believe there was anywhere near the number of examples of improper use that there are now. The landscape for the discussion has changed dramatically in 3 years time.
I do love the trippy end result you ended up with here and was actually inspired to do a similar thing for a game that I've been working on for way too long when I played the demo. It also involved a bizarre cosmic entity. Unfortunately I don't think the area is going to get any easier to navigate ethically anytime soon.
I think the direct and honest tactic you have taken here was the right way to go. I can't imagine anyone having too much issue. Good luck!