I feel like people are comparing two massively different things with regards to LLM NPCs vs human crafted NPCs.
When thinking about LLM NPCs, I don't expect nor want something like Disco Elysium. What I want is something like Dwarf Fortress or Crusader Kings; emergent gameplay. I want NPCs that have meaningful interactions with each other and me, and by meaningful, I don't mean literary, I mean having actual impact. I want to be able to go into a town, have a minor interaction with an NPC that results in knock-off effects that drastically reshape the entire community...and then reload a quick save, do the exact same thing and have a completely different, yet plausible and engaging set of events occur.
I don't expect nor am I interested in LLMs that attempt to emulate great human writers.