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
Kind of like in real life...