I have commented on Todd's failure to deliver on such promises in skyrim before.
But this is definitely where generative ai will be a boon to games, once it's stabilised enough to trust.
I'd love exactly the same; the game should still tell a story or have a point (unless it's a complete sandbox), so key plot points can be included but otherwise it's a simulation and the player can do things with their agency, but so can the npcs.
Would be cool to come back to a village, and now the leader has changed because the previous one insulted someone at the tavern, who killed the leader in a fit of rage. The village then chose a replacement leader, the assailant was publicly executed for their crimes. But the villagers decided this was too brutal a punishment so they removed the leader, who resisted but got driven out of town. The ousted leader wants control of the village back so they've been planning to enter with a crew of mercenaries.
When you get to the village you get given a quest to go take care of the problem, based on the hearsay. Hell, when you get to whatever hideout they're holed up in maybe the npc has even decided to just give up and move somewhere else.
So many opportunities for awesome narratives. I've done experiments with this stuff in text, but not in engine with an actual game.