games already have pretty extensive requirements for function, one model running for all NPC's wouldn't be that bad i dont think. it would raise ram requirements by maybe a gig or 2 and likely slow down initial loading time as the model has to load in. I'm running a pretty decent model on my home server which does the duties of a personified char and the CT im running ollama on only has 3 gigs allotted to it. And thats not even using the GPU which would speed it up tremendously

I think the bigger problem would be testing wise that would be a royal pain in the butt to manage, having to make a profile/backstory for every char that you want running on the LLM. You would likely need a boilerplate ruleset, and then make a few basic rules to model it after. But the personality would never be the same player to player nor would it be accurate, like for example I can definitly see the model trying to give advice that is impossible for the Player to actually do as it isn't in the games code.

Would it? Game developers can run anything on their own servers.