Just watching the video seem to show about a billion ways that AI would have gone wrong. You would have people walking down the street setting their dogs on fire or paralyzing them. Moreover, since everyone has to eat or find items, they would be constantly picking around boxes and barrels or getting in the way at shops.
In other words, the AI would have been a menace. Image some old woman sees a barking dog and she casts fireball, but the dog stands next to a knight so that when she cast the spell it hits the knight. The knight then attacks the woman, but as we know from Oblivion NPCs are always getting in the way so the knight attacks the old woman but hits a town guard as well. In about ten minutes, the whole town is dead because the whole situation escalates into the whole town fighting.
Emergent game play through better AI would be great, but there needs to be sophisticated checks and balances to make sure the world does not go out of control. If they had use that Radiant AI there would be movies on You Tube showing how you could shove one person with a bad disposition into one knight with a bad disposition... and five game days later everyone in the game is dead. Moreover, you might not even know you cased some cascade failure until your game was ruined.
They actually had problems like that.
Questions about Radiant AI: Okay, here's the thing with Radiant AI... If you ask, "Can the NPCs do this? Or can they do that?" They answer is yes, with RAI, they can do a ton of stuff. But the player is unlikely to see some of it for a variety of reasons. For example, if the player hits an NPC with a spell and they get poisoned, would the NPC try to purchase a cure posion potion? Well, no, not likely, because he's going to be too busy trying to kill the player, and besides, the poison probably won't last that long.
And, in some cases, we the developers have had to consciously tone down the types of behavior they carry out. Again, why? Because sometimes, the AI is so goddamned smart and determined it screws up our quests! Seriously, sometimes it's gotten so weird it's like dealing with a holodeck that's gone sentient. Imagine playing the Sims, and your Sims have a penchant for murder and theft. So a lot of the time this stuff is funny, and amazing, and emergent, and it's awesome when it happens. Other times, it's so unexpected, it breaks stuff. Designers need a certain amount of control over the scenarios they create, and things can go haywire when NPCs have a mind of their own.
Funny example: In one Dark Brotherhood quest, you can meet up with this shady merchant who sells skooma. During testing, the NPC would be dead when the player got to him. Why? NPCs from the local skooma den were trying to get their fix, didn't have any skooma, and were killing the merchant to get it!
The demo wasn't scripted. Not that the OMG THE DEVS LIED people will believe it, but oh well.
The video is the same thing we showed at E3. It's pieces & sections of existing game content and a lot of stuff made specifically for the E3 demo (for example, the entire sequence inside the bookstore -- including all of the dialogue -- was made for E3 in order to demonstrate some of the things you can do with RAI.) The player character was beefed up, and the enemies seriously nerfed (to the point of one or two hits to kill) for the demo.
As far as the bookseller sequence. No, the entire thing was not scripted -- not in the sense that it represents a designer typing in hundreds of lines of script code. In the sense that it's a sequence of events that happen in a particular order, you might consider it scripted, but the way you set up those events, and how the actors accomplish them, is not scripted.
For example, the target practice. All she's told to start practicing (basically) is "fire a certain number of arrows at this target from this location." That's it. There's a bow in the room, so she automatically goes to get it first. There's also a quiver in the room, so she goes to get that. She then equips the items, walks over to the firing point, and shoots a few arrows. The arrows miss the target not because she has been scripted to shoot at points away from the target, but because her marksman skill is low.
That's the difference. She's given a basic goal, and figures out how to accomplish it based on what she has available to her and her stats.
The sequence is a set of examples of the kinds of things you can do with RAI -- including grouping a sequence of AI packages together to produce a tight, deterministic sequence of events.
Considering what was posted [and is still being posted], I'm glad there was nothing about this game until it was almost done. Any information the devs posted about Oblivion was shredded into fragments, and taken out of context at every opportunity. I believe that is why they don't post much anymore, and never post about the game the way they did Oblivion. If they don't post anything, it can't be taken out of context, or ranted about if a feature had to be taken out of or changed in the final build. Too bad for the people who would like to know what is going on as far as what they are working on, but I can see their side too.