I think it's highly unrealistic to hope for any kind of Artificial Intelligence. Such thing does not exist, npcs can not have "needs". It's all scripted, the only difference is how many packages you add for each npc. If Bethesda can pull off a true A.I. that's not just a revolution in the video games industry, it's also a revolution for cybernetics, medicine, astronautics and pretty much every aspect of our lives. I think we're asking too much. I'm expecting more variation in scripts for npcs, but nowhere near the level of complexity shown at the E3 demo.
AI is in use from cybernetics to medicine, astronautics to gaming. Its nature requires scripting as in programming. It is a simulation. We have some good examples but there is still so much work to be done. And games have NPCs with needs and goals as part of the AI design.
What you think is http://en.wikipedia.org/wiki/Strong_AI, maybe?
Although, that E3 video from Oblivion was pure scripting. I'm not saying it isn't achievable though.