Thanks for the info on Neverwinter Nights 2. I will check it out.

I agree about having a human in the loop. My idea though was that maybe you could have the best of both worlds with a computer to help the DM. The trick would be making the sandbox rich and responsive enough that the DM and characters would really have freedom in the moment. Maybe the DM could have tools that easily allow him to rez and customize appropriate objects and NPCs in the visualization.