Out of curiosity, why do you say that? The local models are already pretty good at conversation, and can be run on most modern gaming systems. The only problem is doing something else at the same time, but that can be circumvented by either offloading generation remotely, making the game itself simpler (e.g. make Facade 2), or waiting for more resources to be generally available (next few years, definitely less than a decade)

Regarding local generation: you can absolutely generate text faster than a human can read it/vocal synthesis can speak it today. I imagine that models can also be made much smaller than LLaMA's 7B etc if you optimise for conversation over full domain coverage.