Does the "System 1 / System 2" analogy actually hold up for physical AI, or does it just skip over what world models are doing?

The podcast mapped physical AI onto Kahneman's System 1 (senses) / System 2 (decides) / System 1 again (acts). Feels intuitive, but where does a world model fit in — is it doing System 2's job, or something the analogy doesn't account for at all?

Curious how people in embodied AI/robotics see this.