

Smaller LLM models could be great for expanding dialog options in game.
I don’t think LLMs (smaller or otherwise) can ever clear the uncanny valley. The level of adaptability you’re taking about but without hallucinations and random batshit-crazy behavior requires something humans haven’t invented yet and that we have no specific reason will ever happen. (In fact, I think if we can be said to be on a path toward building the first AGI, I believe LLMs and “generative AI” and this whole hype bubble will be looked back on as having been a diversion/destraction from that path that delayed the advent of AGI.)
Unless/until that someday happens, I’d much rather play, and feel like I’d find much more immersive, a game that generated, say, fetch-quests with something like My {rand("health","Lord","wife","none-of-yor-business",...)} {rand("demands","begs","commissions",...)} you to bring a {rand("tufted titmouse","Gauntlet of Light","turkey dinner","giant's toenail",...)} that you can find in/at {rand("Illsword Manor","The Cavern of Lies","the afterlife",...)} to {rand("the illfated dragon","Fenworth Blurd","The Rusty Scabbard Inn",...)} in {rand("Feyspring Vale","Weston","the northern wilderness",...)}. than something with the problems inherent to LLMs.
I suppose I can agree that I’d be interested in new technologies that make gaming more immersive, but “smart” NPCs that can improvise and riff while not ruining the immersion like LLMs would seem so speculative and far off that I might as well wish to stumble into the possession of a genie lamp a la Disney’s Aladdin while I’m at it. Meanwhile, grifters are making shit-tons of money at your expense promising you just that.
AGI has been only ten years away for the last fifty years. Anyone who says it’s less than ten years away now is trying to sell you a bridge.
As for the “filling out assets” and “increased diversity at least at the high end”, I think you’re overestimating the capabilities of (at least current) generative AI. And if you’re not, there are still a lot of legal issues with generative AI, and no matter which way those legal issues end up being decided, we can expect shitty results for consumers and competitors. (I fear, for instance, that the output of generative AI may be subject to copyright when big companies want it to be and not when lawsuits go in the other direction.)

















Yeah, as I said in another comment in this post, I don’t think LLMs can do anything like that, and I think what you’re describing is going to require something that doesn’t exist yet and that we have no reason to think will exist any time soon. (And I’m super pissed that Nvidia et al are raking in billions in dirty grifter money on the contrary promise – which it can’t keep, mind you.)