If there was a deep fundamental inability, we wouldn't see things like newer generations of LLMs consistently improving on ARC-AGI series (heavy spatial reasoning loading) and SimpleBench (a lot of commonsense + spatial reasoning components).

In a way, it's a surprise that LLMs, notoriously lacking any sort of embodied experience, can even get this close to human baselines on tasks like this.

My takeaway is that text is a far richer modality than anyone has expected - and that high end LLMs are often sharp and flexible enough to recognize their weak points and substitute their strengths. I.e. all the LLMs implementing A* to optimally solve pathfinding in ARC-AGI-3 tasks, often unprompted.

There might still be unrealized gains there from true depth-unbounded recurrence, or maybe from finding better ways to integrate modalities in training. But clearly, a "fundamental limit" it ain't.