Hah, that would only improve the industry
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There are two ways I see it:
a) It's a pretty cool thing that games become more interactive and maybe even change depending on the way the player interacts with them (e.g. forging alliances, making enemies, doing the unpredictable). That's some serious replay value and immersion.
b) Obviously, this also adds a second "skill ceiling" to the game. It's not only about how good you shoot, jump or think. With such an AI mod your social skills are also tested. This could be a bad experience for people with bad social skills (for whatever reason).
Truth be told, I think in the end I'd rather see the usual "select dialogue option" in an RPG. Coming up with questions, "talking" to an AI and having to type everything I'd like to say or ask...that's a lot of work. I can imagine that becoming very tiresome very fast.