Cyberpunk 2077 sorta explores this a bit.

There’s a vending machine that has a personality and talks to people walking by it. The quest chain basically has you and the vending machine chatting a bit and even giving the vending machine some advice on a person he has a crush on. You eventually become friends with this vending machine.

When it seems like it’s becoming more apparent it’s an AI and is developing sentience, it turns out the vending machine just has a really well-coded socializing program. He even admits as much when he’s about to be deactivated.

So, to reiterate what you said: predictive text and LLMs are not alive nor a mind.

Prove to me you have a mind and I'll accept what you're saying.

I don't think most people will care, so long as their NPC interaction ends up compelling. We've been reading stories about people who don't exist for centuries, and that's stopped no one from sympathizing with them - and now there's a chance you could have an open conversation with them.

Like, I think alot of us assume that we care about the authors who write the character dialogs but I think most people actually choose not to know who is behind their favorite NPCs to preserve some sense that the NPC personality isn't manufactured.

Combine that with everyone becoming steadily more lonely over the years, and I think AI-generated NPC interactions are going to take escapism to another level.

There's a lot of cruelty potential too. In FNAF Security Breach, you can cripple a miniboss by ripping out her eyes, and you can listen to her lament the fact afterwards. Following on that idea, imagine how many gamers would use AI controlled characters to abuse them in creative ways if they reacted properly. Ooh, I can even chop the legs off!

Worse... it's designed to increase values through friendship and ponies.

It makes sure outside events line up in such a way that you always say "yes" on your own accord to plugging in.

Or another industry for adults.

There are a few mods for Skyrim that adds LLM AI companions. So you can talk to them about whatever and they can talk back. The future of RPGs is going to be pretty sick.

Indie games like the one you mentioned are going to be able to explore some pretty cool concepts and really push the artform into amazing directions.

but they can't kill you IRL yet, we need the Sword art online headsets.

The issue is that so far, AI is really just pattern emulation. I imagine it's fine to flesh out cheap "Kill 10 boars" sidequests, but LLMs are not very good at original or meaningful stories and frequently break down into nonsense over long narratives. It's more likely you'll get the sort of simple self-made stories you see in procgen or rogue like games

An AI that runs a tavern? A Taven AI if you will?

This might be the first time that a computer game (well "sort of single player") actually can come close to a pen and paper RPG experience.