I would say local LLMs are already good enough for this. It might be an issue that the GPU is already quite busy at the time it's needed for LLM inference, but not an insurmountable issue.

I wouldn't ever want a game to use it for the core story writing, because it's pretty important that it is consistent and unable to be derailed. But for less serious NPC interactions or like an RPG scenario it is such a great fit.

I also wouldn't want a single player game to rely on remote inference, because that will get turned off eventually and then your game doesn't work.