Before laying out what in the heck I'm talking about, know that this isn't really a criticism topic. Dialogue that's not in real life whether voiced or written is limited unless some game company actually hires a crew of people to watch you play the game and play the roles of the characters you talk to.

What I wonder is how certain situations can be handled and the families in this game make for good examples. Let's say there is a dad who owns a successful antique & thrift store who has a wife, a son, and a daughter. One day you walk around, sell some dwemer stuff to the dad (Hopefully you had your Miller's pocket guide to check for Maker's Marks!), talk to the mom about something, and walk by the kids who may or may not say something. Then next month the son is kidnapped and the ransom happens to be a few wicked expensive antiques along with any and all cash the family has.

Is it reasonable to expect all three to refer to the kid by name? (big no IMO if there are more than a couple of these quests) Refer to him by six? Or just a generic nickname to indicate a young loved one like "my little sweet potato pie"? Then if you kill the dad could the mom refer to the fact YOU did it aside from just having a lowered disposition? Or if he was killed in the wild would it be the same dialogue but with a higher disposition? Then if the sister became responsible would she know both parents are dead, seem sad, and refer to the lost child as "little sugar plantain"?

We can't answer those questions, but it's at least something to think about. Games are getting really dynamic (at least this one!) and it's really hard to see how any developer will be able to fill in the tiny details like those without intense effort and a hive mind. It's not even a question of time or money when you think about the sheer effort it would take to set up a quest like that with all the variable paths filled in too "just in case". Then multiply that by 100x for the other quests and scattered detailed NPC relationships they felt like putting in.

Characters are ultimately records in a database with other records associated to them. Its easy enough to program the AI to look up character names and genders based on relationships to other characters.

"select name / gender from characters where father = tom miller"

Now Tom Miller knows the name of his son(s) and/or daughter(s)

Yeah but can he say it, along with the other hundreds of important NPC's who need to talk about related NPCs? From what I know, all dialogue will be voiced.

Well if the quest is scripted, I imagine it could be voiced. If the quest is procedurally generated, they might be able to get away using gender neutral terms like "my child", "my baby", etc.

they do that in Fallout 3. there's a ton of custom dialogue between and involving specific NPCs. since the way Skyrim's dialogue works is closer to Fallout 3 than Oblivion, it's certainly possible.