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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I think sandbox games like animal crossing are the exception, if it ever becomes reliable enough to put in anything other than an M rated game.
Animal Crossing, the Sims, Cult of the Lamb, and similar games would infinitely extend the life of the game. But I am sure we can all already imagine the headlines when these "family" games start saying things that they really should not be... especially given recent issues.
For the record, not dismissing the person who did this work. But doing this commercially has its risks.