Play is pivotal in fostering the emotional, social, and cultural dimensions of urban spaces. While generative AI (GAI) potentially supports playful urban interaction, a balanced and critical approach to the design opportunities and challenges is needed. This work develops iWonder, an image-to-image GAI tool engaging fourteen designers in urban explorations to identify GAI's playful features and create design ideas. Fourteen citizens then evaluated these ideas, providing expectations and critical concerns from a bottom-up perspective. Our findings reveal the dynamic interplay between users, GAI, and urban contexts, highlighting GAI's potential to facilitate playful urban experiences through generative agency, meaningful unpredictability, social performativity, and the associated offensive qualities. We propose design considerations to address citizen concerns and the `tourist metaphor' to deepen our understanding of GAI's impact, offering insights to enhance cities' socio-cultural fabric. Overall, this research contributes to the effort to harness GAI's capabilities for urban enrichment.