I don’t think they're kidding themselves into thinking he's elite and can take them to the chip.
But for what they need at the moment, he can definitely help to make the other guys better and move the offense more efficiently. Which is his job, if he's given more opportunities to do that. Which is why Willie said, "We have a lot of talent on the team, that maybe hasn't gotten the looks they need to really blossom". And he mentioned Alvarado. Sometimes, all dudes need is a chance. I think he's one of those guys.
As we can see, that offense was mad stagnant with CJ at the helm. They need more speed and way more energy on the floor. CJ's style of play doesn't work well with the young talent on the squad.
At this point, it's about time to get into that contending status though. Zion has been there 5 years and Ingram has been there with him for 4.
I agree that CJ doesn't work in the grand scheme, but I don't agree that Alvarado is the answer at PG while trying to find a more "dominant" SG than CJ, because those are just as rare or not rarer than elite floor generals, and getting an All-NBA SG is another scorer needing a bunch of shots and clashing with Zion and BI.
BI and Zion can work but they're better served finding a PG who has proved they can score enough if necessary but doesn't care about his shots and is comfortable setting the table, in order to maximize them.
Alvarado has been around 3 years. I think if he was the answer to run with the first unit and be what we're describing, he'd already be starting and showing it.