Just found this interview on google that mentions instances where the radiant AI went horribly wrong - thought it might provide an interesting read to those who hadn't already read it -
"1. One character was given a rake and the goal “rake leaves”; another was given a broom and the goal “sweep paths,” and this worked smoothly. Then they swapped the items, so that the raker was given a broom and the sweeper was given the rake. In the end, one of them killed the other so he could get the proper item.
2. In another test, a minotaur was given a task of protecting a unicorn. However, the Minotaur repeatedly tried to kill the unicorn because he was set to be an aggressive creature.
3. In one Dark Brotherhood quest, the player can meet up with a shady merchant who sells skooma, an in-game drug. During testing, the NPC would be dead when the player got to him. The reason was that NPCs from the local skooma den were trying to get their fix, did not have any money, and so were killing the merchant to get it.
4. While testing to confirm that the physics models for a magical item known as the “Skull of Corruption,” which creates an evil copy of the character/monster it is used on, were working properly, a tester dropped the item on the ground. An NPC immediately picked it up and used it on the player character, creating a copy of him that proceeded to kill every NPC in sight.
5. In one test, after a guard became hungry and left his post in search of food, the other guards followed to arrest him. The town people looted the town shops, due to lack of guards.
Bethesda worked to fix these issues, balancing an NPC’s needs against his penchant for destruction so that the game world still functions in a usable fashion. In-game there are over 1,000 different NPCs, not including randomly spawned monsters and bandits. The result is that the AI in the release version is much reduced, only featuring NPC schedules."
The remark "The result is that the AI in the release version is much reduced, only featuring NPC schedules" is a load of BS.
I definitely remember the article in which a Bethesda spokesperson talks about item #1. I
think Gavin Carter is the one who mentions it, and I
think the focus of the article is Radiant AI. Unfortunately, it seems the article is no longer posted on the internet. Item #5 appears to be mis-reported. I vaguely recall an article where someone from Bethesda mentions a guard wanting food, going hunting, and then somehow ending up in a fight with another guard because of it. My even fuzzier recollection wants to say that the crime or issue was connected to killing a deer, not to deserting a post. As for items #2, #3, #4, I really can't attest to their accuracy. Anyway, that's enough reminiscing.
If one looks at the http://cs.elderscrolls.com/constwiki/index.php/AI_Button in the Construction Set, one finds the means to correct items #1, #2, and #3. NPC's have a Responsibility setting and an Aggression setting -- simple. There are a number of ways they might have corrected #5 without reducing the AI one jot. I do not know how the game addresses item #4.