You may be able to have more involved conversations with an LLM-powered NPC, and it won’t be pre-scripted at repeated, but it is still likely to be both nonsense and not necessarily relevant to the game loop and may be setting-inappropriate dialogue. The pre-scripted and repeated dialogue would almost surely not have those problems the LLM would.

Its important to remember that these LLMs are grievously power-hungry for what they do, so if they only trade one problem for another, you must also consider the loss of efficiency as yet another problem, even if its not always that big of one.