It would need some huge changes in order to work on the fly. You need the model to produce information that is

• consistent with each individual NPC’s role in the game word
• consistent across different NPC’s
• consistent with the actual game.

The third is the biggest hurdle now: you can’t have an NPC making up a bunch of lore about the city they came from and telling the player how to get there, only for them to find that the city isn’t actually in the game. Or telling the player about abilities they have but don’t actually exist in the game.

It would also be bad to have NPC’s just spill reveals the player isn’t supposed to know about yet.

The more likely use case is to speed up dialogue creation, with human writers editing and curating ChatGPT’s output to make sure it is consistent with the intended lore and gameplay.