Wait... NPC interaction has never been a strong point of this series... hell, in Morrowind system was arguably worse - generic lines based on a single 1-100 value, having very primitive sets of whether or not an NPC will talk about certain things (basically, below 30 they stop being nice, below 10 they stop doing anything for you, and above 70 they'll do things they normally won't. Pretty much every "speech check" was just looking for 70 in disposition). And to increase disposition you pressed one of 4 buttons, which all did the same thing except some traded ease for money. Taunt was a good feature though, if stupidly abusable.
NPCs seemed to have a little more character until you clicked on any generic topics to have the NPC immediately respond with a generic line (Skyrim has less lines but NPCs generally don't share them as much) that you read a thousand times. Taking a look in the editor now, although not realised, Skyrim's new system seems rather more complex, and NPCs interact with each other in ways beyond "I saw a mudcrab". The system appears to be part unrealised, part realised but not very well expressed. Looking at this system NPCs are all set up to uniquely engage with the player, but most don't.
The guards are the truly generic NPCs, which interestingly is the case in Morrowind with mods such as LGNPC. Guards are generic, they were born to be that way and that way they shall remain forever more
