1) you need to be able to ensure that the characters don’t hallucinate new details. No big deal.
2) you need to be able to ensure that the characters don’t suggest they can or will do anything that they can’t do. For NPCs, this is typically literally nothing. They can’t do anything. It’s actually way worse for realism and immersion if every character has a unique reason why they can’t do anything than every single guard citing their arrow to the knee and leaving it at that.
3) NPCs for story reasons often should know something but don’t tell you it. It’s very difficult to execute any sort of story flow if your characters are suddenly free agents. At best they merely lack self consistency. Stories are not going to become better if you can meta game them as genre savvy speculators.
4) NPCs with irrelevant backstories are very dull. They are absolutely annoying to talk to. We have these in DND. And you may say “hey, I loved my DND NPC”, but that character probably started to become very important as consistent because of the DM’s attention. Which is cool for DND, but it’s not cool for a structured game.
Like, would Harry Potter be a better experience if you could personally grill dumbledore for information in the middle of the first book? I think 100% no.
Dumb NPCs are an aspect of the suspension of disbelief of game writing. And it largely works. Asking for LLM agents is like asking to remove the need for the suspension of disbelief. But most narratives are too fragile for this to happen.
Narratives generally follow a flow that ultimately concludes after a climax. If you give players more agency the most likely outcome is that they follow a path that does not hit the climax.