You can always change iGreetDistanceMultiplier, can't you? It is multiplied by Hello Setting of NPC to determine their distance of detection.
I'm pretty sure that is only for voice greetings.
Which is precisely why this is a situation which isn't best suited to a code-change solution. I don't know how far away I am from you, but we're communicating, and the chances that I'm facing you are actually pretty slim. If I wanted to have a face-to-face conversation (No pun intended. This is, after all, the root of the issue.) then I'd have to get a lot closer. If you are correct and this is something which can be adequately adjusted by game settings, then this isn't a reasonable suggestion for the code patch. Honestly, I don't see why this issue was even brought up. The issue is only of interest to people who are trying to role-play, and those are the very same people that should know to get closer before attempting to speak. True, it doesn't make much sense to have a conversation with someone whose back is turned. Neither does it make much sense to carry on a conversation with someone on the other side of the room.
Ironically, the solution to the second problem is also the solution to the first.
I believe the issue was brought up in the first place because Runspect wanted to know if Oblivion-like zooming could be implemented, presumably without Talky Morrowind. I only suggested the GMSTs as a possible solution. There are other reasons to lower the distance covered by those settings; 192 units is almost nine feet, or nearly one meter. You can't really activate things like levers from that far away with your hands, not to mention pickpocket someone, even though you can speak to someone that far away. Unfortunately, there are no separate settings for each situation.
Now, if someone wants zooming during dialogue in Morrowind, it may be possible with an MGE mod. I don't know enough about scripting with MGE, but I know it can zoom. I don't know if you can make it account for your distance from an NPC when zooming so as not to zoom too much or too little, though.
From a role-playing perspective, I like being able to talk to someone who has their back turned to me. Hostage situation, anyone? Good luck implementing that, though. I would like better NPC reactions. Maybe turning away from you when you talk them, or as peachykeen stated, disposition-based turning, but I don't think that is going to happen.