Grabbed this piece on dialogue in games from Andrew at Grand Text Auto. Matthew Sakey in Talking with Transistors:

Part of it is that we are still roleplaying with circuit boards, and technology means it’s going to be that way for a while. When the day arrives that we’re actually roleplaying with the game AI, and not a pre-scripted database of reactions… well, that day we can just do away with other people altogether and it’ll be great. But right now – and despite the never-lived-up-to claims of some developers, including a couple mentioned here – game AI advancements seem irritatingly focused not on character and world reaction to player behavior, but on combat skills, so it’s going to be a while before The Elder Scrolls MCMLXXV responds in a genuinely dynamic way to our remarks and activities.

Part of this is easy: fiction writers or other writers who know what good dialogue is have to involved in the development of these systems. The person who lives inside the voice of a persona needs to be drawn into the game. Here’s a question: can players write good dialogue? I note that my browser still thinks this word is alien.