This is awesome. LLM-powered NPCs is one thing I'm most excited about in the future of gaming. Characters repeating the same scripted dialog over and over again is one of the biggest immersion breakers.
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There could probably be cool uses but I don't think it will be a pure "upgrade" as the repeating dialog is kind of a feature honestly.
We'll have to see how it pans out xD
But even for story-driven games, you can signal when you're "done" extracting story-related details in various ways, by e.g. prompt the NPC to include dialogue element A,B,C when it fits the conversation, keep track of which were output (you can make it output a marker to ensure it's easy to track even if the dialogue element has been worded differently), and have it get annoyed and tell you it doesn't have more to tell you or similar as the repetition adds up.