Hallucinations will not lead to a declining interest
The answer to question 1 is I think a clear no. You can get useful output from LLMs without the hallucinations being a problem.
If you are not an expect on a subject the LLMs output can be educational
Also some people are using the output as the basis for their own work without using it verbatim.
There are examples of people using it to provide the outline of an email or even a story which the user then completes.
In the world of software it can be used as a better intellisense even though when asked to produce code it can produce code that is at best non-optimal and at times dangerously wrong.
Unfortunately of course there will be people who don't use models with sufficient dilligence and will try to use them to exploit opportunities such as mass marketing or phishing and some people will be sold even in spite of of glaring problems.
This and the flaws create a potential image problem for this kind of AI but the obvious benefits and conveniences outweigh the flaws.
Combining LLMs with other systems makes hallucinations less dangerous
Question 2 is much more interesting
My feeling is that the answer is to use LLMs as a component of a more intelligent system rather than as the main driving engine of it.
This is a view shared by many others for example (mostly random selection):
Whether companies choose to focus on the LLM side or pivot to work on combined system will depend on the company. I expect wealthly companies like openai to be more likely to use that wealth to do so. LLMs coming out of big companies like Google/Alphabet already have that machinery behind them.
There is active research into reducing hallucinations
That is not to say that hallucinations in LLMs are not a problem in and of themselves that is not worth addressing because it certainly is and there is of lot research going into that area which other people can probably describe much better than I.