Hi there!
Put the plugin (.js file) into <your project root>/js/plugins/
There should be a couple of default plugins in there already. No need to create new directories!
After that, in RMMZ, navigate to plugins and add the AI plugin there. The rest is documented in the engine.
I fully agree about the responses being unstable. After all, that's the main feature - and problem - of AI responses. You never know what you get back, so it might be fully hallucinated nonsense. You can try to steer the responses to be more refined by writing better prompts, but as soon as they get lengthy, that just ups the cost per response with very diminishing returns. As such, I highly recommend to only use this for NPC chatter, not for a main plot line - or an NPC that NEEDS to give accurate directions.
In your example with the wise man, you can add all those lore details to the prompt. Then it should be part of the response, however... it may be not. Depending on the AI.
That - paired with the running cost issue per request to openAI - is also the reason why this plugin is fully free. It's experimental, and from my personal point of view not "production ready" for a commercial game.
Regarding NPC objects - I just tried it for a chair, and the result was:
"Oh, hello! I'm just a simple chair, but I've seen many adventurers come and go."
I then tried a more refined prompt ("Respond in asterisks, describing actions, [...]"), the result was:
"*You are sitting down on the chair, which weirdly enough sighs.* Ah, that's the spot! I've been waiting all day for someone to give me some purpose. Rest here for a moment, adventurer."
...interesting result, LOL.
And lastly, 2Plaer: yeah, admittantly I was bothered a lot by his responses. To make "demands" for a free and marked as experimental plugin just irked me, and then him describing features that aren't even in here... I dunno. Honestly I may have been too flippant, but that sure annoyed me.