The rapid advancement of artificial intelligence (AI) in education underscores transformative prospects for open and distributed learning, encompassing distance, hybrid, and blended learning environments. This qualitative study, grounded in narrative inquiry, investigates the experiences and perceptions of 141 preservice teachers engaged with AI, mainly through ChatGPT, over a 3-week implementation on Zoom to understand its influence on their evolving professional identities and instructional methodologies. Employing Strauss and Corbin's methodological approach of open, axial, and selective coding to analyze reflective narratives, the study unveils significant themes that underscore the dual nature of AI in education. Key findings reveal ChatGPT's role in enhancing educational effectiveness and accessibility while raising ethical concerns regarding academic integrity and balanced usage. Specifically, ChatGPT was found to empower personalized learning and streamline procedures, yet challenges involving information accuracy and data security remained. The study significantly contributes to teacher education discourse by revealing AI's complex educational impacts, highlighting an urgent need for comprehensive ethical AI literacy in teacher training curricula. However, critical ethical considerations and practical challenges involving academic integrity, information accuracy, and balanced AI use are also brought to light. The research also spotlights the need for responsible AI implementation in open and distributed learning to optimize educational outcomes while addressing potential risks. The study's insights advocate for future-focused AI literacy frameworks that integrate technological adeptness with ethical considerations, preparing teacher candidates for an intelligent digital educational landscape.