As I said:
It's not about it predictable output, it's that it has no actual understanding of anything. It's a pattern recognition and generation tool that spits out input based on what it has been fed. It can't understand context, emotion, or the bare basics of actual writing.
You're essentially asking for random one-off NPCs to become backstory text dumps that have nothing to do with the actual setting of the world or feel ingrained into their environment.
Someone actually went in and wrote the one-off reusable NPC dialogue so that it fits the setting and still manages to be memorable despite being overused, and they don't feel out of place within that world. They are unimportant characters used for background noise and environmental population, and their dialogue reflects that.
Art isn't about just outputting more and more. Quality, not quantity, and having random one-liners from nameless NPCs but a core story that's engaging is far more interesting than a million generated NPCs that all have backstories that mean nothing to the player or setting.
Yeah I still disagree. The scenario I'm envisioning has nothing to do with text dumps. I guess I'll just further explain what I'm thinking of using Skyrim. You get to Whiterun.
There's a ton of crafted and deep interconnecting storylines between what's happening at Dragonsreach, the feud between the battle borns and greymanes, and the companions. There's also a score or so of the infamous guards. They don't do anything but regurgitate the same dozen lines. It's not important that they have nothing going on. It doesn't really detract from the world, but I don't think you'd be complaining if there were more writers to make these characters stand out a bit better.
Problem is, there's not time or budget for that. Furthermore, if someone was hired specifically to write that dialog, it wouldn't be a very fulfilling job. So instead, why not have some data engineers spend a quarter training and tweaking a model with all of Tamriel's lore. Now the writer goes in, gives the context of the setting they want an NPC for, and then they get to pick a line or two that gives the guard a little extra flair.
At the end of the day, it doesn't actually matter if the line originated from the AI or the writer. You wouldn't know the difference, you get a game that feels just a bit more fleshed out, and the writers don't have to write dialog that no one really cares about. It's a win/win/win.
Also, saying GenAI can't understand context, emotion, or bare basics of writing seems a bit disingenuous. Like sure, I computer can't "understand" like a human can, but it can remember information, make associations, recall that information, and demonstrate novel application with that information. It may be primitive and doesn't always get it right but that sounds pretty damn close to understanding to me. And let's not forget that GenAI is still VERY new in the commercial space. People seem to have this idea that we have now is what it'll be forever. People like to use the "Gen AI is just a fancy text predictor". I don't know where that came from, but I think it's inadvertently caused a lot of misconception. That is the easiest way to explain it to a layman, but it's a very loose definition and kinda falls apart under scrutiny.
Ultimately, it's a matter of taste when you think about it. You say you want those Skyrim characters to repeat the same dozen lines as long as a human wrote them. I say I want them all to have a unique set of lines as long as they're verified by a human. I'm not gonna change your mind and you're not gonna change mine. There's no "right" answer here.