LLMs could theoretically give a game a lot more flexibility, by responding dynamically to player actions and creating custom dialogue, etc. but, as you say, it would work best as a module within an existing framework.

I bet some of the big game dev companies are already experimenting with this, and in a few years (maybe a decade considering how long it takes to develop a AAA title these days) we will see RPGs with NPCs you can actually chat with, which remain in-character, and respond to what you do. Of course that would probably mean API calls to the publisher’s server where the custom models are run, with all of the downsides that entails.