From the abstract, it looks like it's actually doing something deeper, updating weights in part of the model?

I assume compacting is the sleep here; so, yes

This is the struggle of naming papers. You could stretch definitions and make your own sexy headline or you could be precise and fewer people will read it.

>we study a sleep-like consolidation mechanism in which a model periodically converts recent context into persistent fast weights before clearing its key-value cache

There is a strong, non-trivial connection here between what your brain does in sleep and what they are studying.

You wouldn't object to referring to robot eyes or robot legs.

The analogy is helpful, but yes we should be able to “intelligently design” something better than sleep analogues since we’re not constrained by evolution like in humans.