To make this work, you need your LLM-based AI to outperform any other form of generating quests and rewards -- and that performance is measured on things like player enjoyment, game/story progression, exploitability, client system requirements or server operating costs, etc and most of those things are very hard to constrain or optimize for with an LLM right now.

While the costs are hidden from end users and are going down quickly, good LLM's remain very expensive to run and very hard to keep on track compared to other options.