Do you guys think that AI video upscaling is ethical?

AI inherently is unethical -- it uses copious amounts of water and electricity to do whatever it needs to do. This includes text generation such as ChatGPT, so there really isn't any safe, environmentally friendly way to use algorithmic learning at this time.

I recently saw some upscaled videos of Kidd Video where AI was used to fill in the blanks for parts of certain episodes where the English audio couldn't be found and I've got weird feelings about that.

afaik topaz lab video upscaling runs locally

Yeah, that's kind of a inherit problem/concern with AI, it leads to the spread of misinformation. People can use AI to, say for instance, make fake voice clips or, like you said, make AI extensions to lost songs, and people would think it's real. And considering how much misinformation spread online before the creation of AI, it can only get worst thanks to AI, especially with how often people take things they see on the internet at face value.