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I remember reading that there will dialog initiated before combat sometimes, or something to that note anyway. maybe that means that NPC's can shout at you instead of running super fast up to you and getting all up in your face. Like maybe a bandit will yell at you to drop you weapon or to come over slowly and give him all you money.
What was really annoying is when you're crouched, fully invisible, and some stupid NPC with something terribly important to say runs up to you to deliver their snide remarks. Even worse, since once the conversation is over, they're still wondering were exactly you are...
From: | #015 There was an in depth conversation in Oblivion? *turns around suddenly* Where?!
maybe not in-depth, but the process can be. you talk to someone for a while, read whatever they will tell you, then persuade them for a little while. then go back and listen to what they wouldn't tell you before.
if time didn't stop, that whole process would eat a big chunk out of an in-game day.
i have a feeling its going to be like Heavy Rain, where the options appear as your approach a NPC and the options are each tied to a button. And its been said that non quest NPCs aren't going to be able to conversed with so there wont be that much of problem.