Skyrim did this wonderfully. They made the world feel alive in a never seen before way. NPC's would have dialogue with eachother and you based on region, ethnicity and most importantly, recent world events. Which made your actions feel very impactful in a way that it influenced the world around you.
Dialogues integrating town status such as poverty, loyalty or prosperity would be even better.
@NPC99 For example: giving aforementioned beggar money could trigger a temporary loyalty bonus based on chance. Or, depending on the culture, could have the opposite effect as it would be seen as flaunting riches resulting in a loyalty penalty.
TW is planning to implement vocalized dialogues but although their "Future Plans" post is rich with new systems and features there is no mention of fleshing out NPC's further in ways mentioned in this thread.