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As a dm I do this too for npcs and sometimes for pcs if they have a specific concept. Otherwise it takes hours of searching and you always have to settle, nothing is quite right. I don’t see an issue with it, no hobby dm can spend money on an artist creating every npc and it’s not feasible to expect it. This way I get high quality art if I’m willing to put the effort in to sorting and correcting images through repainting. Especially since I run a campaign set in feudal Japan. Orcs and kobolds in japanese traditional garb is not very common! Ai even let me run an encounter of a fashion show by providing the players a bank of images to curate a collection from and compete with other collections I made using ai.
I still spend money on patreon for monster tokens and maps and I doubt that would change even if ai could make good ones. I pay for their creativity and concepts not just the art.
I will also die on the hill of pf >>> 5e.