Yeah, that hit really hard.
The story thread also shows the development changes/alternate interpretations compared to
Reboot -- where Mainframe's binomes were aware of being programs and relatively happy to be repurposed from business to gaming (despite the ever-present threat of nullification), the purpose-built game character in TADC has an existential crisis upon learning that all that he knows may be false memory.
(Hmmm, that sounds familiar.)
So is Caine really worried that he won't be able to tell who's who if game "sprites" learn and develop? Or is something else going on? He definitely seems to have some odd and sudden changes of mood when these topics come up....