NPCs have been reacting to a player having his/her sword out since Morrowind. As far as actually having job, half the NPCs in Morrowind didn't have jobs. They would wander around aimlessly in town, eat randomly, and then go to sleep randomly. Now, all npcs actually will be making use of their time doing believable tasks, instead of wandering aimlessly. Cosmetic or not, they are improving the system. I'm just curious how much they are actually improving it, which at this time (besides what they have announced) seems minor at most.
In Morrowind and Oblivion, NPCs' dispositions toward you are lower if you have your weapon out while talking to them, and only while talking to them. In Skyrim, according to the GI website, they will also react to you if you swing your weapon near them. I think that NPCs executing a better variety of believable tasks may be an AI improvement too, even it does not make it any smarter.
How is dropping a weapon in any way related to Radiant Story? It's not at all, as it is clearly an improvement to Radiant AI. As far as relatives dying, sure that is a mechanic if the person happened to have a quest for you, but I'm sure it will work the same even without Radiant Story.
Under "The Radiant Story" in the February issue of Game Informer:
Wandering through town, you could enter your inventory and decide to drop a heavy two-handed weapon rather than sell it at a nearby shop. In some instances, the weapon might be forgotten in the mud. At another time, a young boy might grab it up and rush after you, asking if you had dropped it and might like it back. In a third instance, two burly men might reach the weapon at the same time, and begin to fight over who will take it home.
If Radiant AI were dictating the behavior, I would expect the description to address NPCs' actions according to their goals and dispositions. I would also expect it to credit Radiant AI with the behavior. It doesn't. I have seen no official source that does credit it to Radiant AI. Instead, this article and others seem only to be providing instances of what Radiant Story makes happen based on your character's history. Radiant AI might be liberal enough this time around to allow NPCs do do these kinds of things on their own, without Radiant Story forcing them. I just haven't seen confirmation of it.
Your wrong. Have you ever used the CS for Oblivion?
Watch this : http://www.youtube.com/watch?v=nWvbVhfWnK0
As well as the other three parts. I think the stuff about the RAI is at the end of the second part and the beginning of the third, not sure though so just watch all 4 parts.
I wouldn't be surprised if the dog is executing the Ambush package to pester the woman, and the woman reacts to that. The video is interesting, thanks, but it doesn't explain how they prepared the demo.