70 hours in the game and 1 and a third playthroughs (there just wasn't enough replay value for me to get any further the second time) and i never noticed anything remotely like that. Overrun towns/camps are static, the guards were always searching the same peasant on the same street corner, and all the quests or missions i encountered were in the exact same places.
That's not to say that it doesn't happen... Apparently dragons will actually attack cities in Skyrim but in over 3000 hours between my friends and i've never seen it (literally no one i know in my offline-life who plays it has ever seen it happen).
Even then, the fact that there are only a handful of actual NPCs in The Witcher 3, and 99.999% of the actors are personality-free filler, facilitates that kind of interaction far more than you can accomplish in a more... Character populated story. Hell, the whole reason protected NPCs, in their current state, exist, is because of the game inadvertantly killing off important NPCs without the Player's knowledge. When your world is full of people who not only don't matter, but are barely even there to fill space and respawn whenever you move 30 feet, that kind of 'dynamic' interaction is far easier to accomplish. But in a world with actual personalities that don't come back from the dead, it's another issue entirely.
I think there's room for both, really. I wouldn't go full on ESO with the motifs, but include more internal variation (for instance, Morrowind had 4 styles of Bonemold) but that sort of system allows for the most variation, both in stats and aesthetics, and is the best way to represent the highly individual nature of armour. Like most things, its dependant on how the system is used, but a similar 'Motif' or 'Style' system is really the most diverse and mechanically solid approach to the crafting.