Yes, language models are good for text. That's their sole purpose. They can't control characters. There are other models for that, and they are obviously not language models.

Well, they actually can, at least to an extent. All you need to do is encode the worldstate in a way the LLM can understand, then decode the LLM's response to that worldstate (most examples I've seen use JSON to good effect).

That doesn't seem to be the focus of most of these developers though, unfortunately.

Right, there's no possible way actions can be represented by a stream of symbols.

Did you watch the demo? The player literally told the bartender to break out the good stuff and he did just that…

They're a massive and combinatorially exploding part of the equation, though.

Imagine a world where instead of using AI to undermine writers and artists, we use it to explode their output. A writer could write the details that make a character unique, and the key and side quest dialogs that they write now, which could be used to customize a model for that character.

The player can now have realistic conversations with those characters that would make everything better. You could ask for directions to something and then follow it up with more questions that the NPC should know the answer to. Etc.

Now inconsequential filler characters, like a ramen shop owner in the example, become something potentially memorable but explicitly useful in a way that could never possibly be hand crafted.

This article is shitting on an incredible early attempt to allow for this by taking the fact that it's not done yet and crossing that with their biased opining and producing a kotaku-style click bait from it.

I would love to have a game - or a genre of games - using AI NPCs.

What I absolutely don't want is every game using AI NPCs.