Agreed! That would be great and is doable right now. As a developer, you'd have to store all the metadata and feed the AI information and instructions, per character. It is something that can be done and some "chat" style games have done before in a singular way. The future will be fun where you can chat with any NPC and have a full conversation with an AI that sticks to that NPCs character/background/emotions. Can't wait!
If you play my game, put the difficulty on "Infinite" and it gives you a free form text box to forge your own path through the story instead of the AI generated options. It's a glimpse into how it would work. AI is good at handling your input and trying to keep the story going at the same time. I've instructed my AI to try and keep the story moving along but take the user's input into account. It's not perfect but it's the worst it will be....