If they can't make the AI do it, atleast they could script it, but in a subtle enough way that it doesn't feel scripted.

I don't like they fact that the world around me would change, at least not too much. I want to experience it all, be a part of it. I don't want to come to a city only to find every one dead and then have ot face an whole army on my own, nor do I want to find my questgiver dead because he spoke badly about the king. Some things I can agree should change but they should be a part of the players choices and deeds, along with quests.

One of the best experiences I had in Oblivion was when I ran into a group of dead bodies of some NPCs having fought each other just lying around in the wilderness... I actually don't know if this was caused by some mod issues but still, the fact that something has happened without you being involved, that kind of feeling that the world is progressing without you is awesome.

About wars, they don't need to make things big scale, but if the world space is big enough, and they have small patrol parties, trade caravans etc moving around and interacting according to the politics AI you mentioned here, and those small groups interacting, fighting etc would add a lot of immersion and surprise factor to the game.

While I'm not saying such a thing couldn't happen in such an engine it would be incredibly unlikely. It would be like war between feuding lords, they seldom destroyed cities, that stuff was saved for military campaigns against countries, rather skirmishes would take place in the wilds between cities. As for the example of quest givers killed for treason and such, that is a distinct possibility. However, the point is quests would be procedurally generated, prizes and information in the world would be fluid, and the politics would create new routes for quests, just because the quest giver is dead doesn't mean the quest is dead, it just requires you become an investigator of sorts, and try to figure out how best to pursue this issue and continue with your quest. If on the other hand its merely a simple quest completed for said quest giver with a monetary reward... Just take the bloody money off his corpse? Why the necessity for false gratification?