Yeah I am not exactly too fond of the AI idea. I also acknowledge that the focus of M&B is not really developing relationships or having consequential dialogue.
Bannerlord doesn't need (and shouldn't have) D&D/Baldurs gate level of RPG elements. But the NPC's feel dry. You do gain some advantages for having high relations with NPC's, but those advantages don't help them feel alive.
I think adding some more reactive/immersive/relevant dialogue would help and I don't think (I am certainly not a developer) it would take much effort to implement compared to other things.
I would really like to see feasts come back and the addition of festivals would be nice as well. I think it would help the NPC's come to life a lot more. But, I do understand that considerably more effort is needed to implement those in a way that fits with the rest of the game.
I would just like to see a little more life in the NPC's. It definitely doesn't need to feel like D&D.